West Asia crisis: Rupee breaches 92 against $, RBI buys govt bonds
The rupee slid to a new low of 92.30 per dollar as tensions in West Asia drove crude higher, before recovering after RBI sold dollars and bought bonds to curb volatility
 "West Asia crisis: Rupee breaches 92 against $, RBI buys govt bonds")
The rupee fell to a record low of 92.30 against the dollar on Wednesday, pressured by escalating geopolitical tensions in West Asia that have sent crude oil prices sharply higher in recent days and stoked inflation concerns. Government bond yields also firmed in early trade, reflecting unease in domestic markets, before paring gains after central bank intervention.
The local currency recovered part of its losses to close at 92.15 per dollar, down 0.71 per cent from the previous close, after the Reserve Bank of India intervened through dollar sales, dealers said. They added that the central bank stepped up its intervention after the rupee breached the 92 mark, a level it had so far protected.
This marked the Indian unit’s fourth sharpest fall in the current financial year, during which the currency has depreciated 7.25 per cent. In 2026, it has declined 2.46 per cent.
The rupee remained under pressure as Brent crude prices stayed at elevated levels, while global equities retreated as investors assessed the risk of a sustained rise in oil prices.
Furthermore, the dollar index strengthened to 98.96 from 98.22. It measures the greenback against a basket of six major currencies.
“The rupee’s fall was driven by the sharp rise in crude oil prices and a broader shortage of dollar liquidity in global markets amid the escalating conflict involving Iran, the US and Israel,” said Anindya Banerjee, head of currency and commodity research at Kotak Securities. “We expect the RBI to intervene periodically to contain excessive volatility and prevent a disorderly depreciation in the rupee. However, as long as crude oil prices remain elevated, the rupee could continue to face depreciation pressures.”
He expects the currency to trade in the 91–93 range in the coming days. India’s balance of payments deficit widened to $24.4 billion in the October–December quarter, compared with a surplus of $4.5 billion in the same period a year earlier, a shift likely to weigh on the currency in the coming days.
“With current oil levels, our BOP and current account deficit are bound to deteriorate unless the Iran war ends quickly enough. Foreign portfolio investors have been sellers and dollar buyers since the end of February, and the situation has only aggravated now,” said Anil Bhansali, executive director and head of treasury at Finrex Treasury Advisors.
Market participants said the key variable to watch is the status of the Strait of Hormuz, a vital conduit for global crude shipments. Prolonged disruption along this route could push oil prices higher, intensifying external pressures and potentially driving the dollar-rupee pair further up. Conversely, a swift de-escalation and the resumption of normal shipping through Hormuz could temper crude prices, offering some relief to the rupee.
In the bond market, the yield on the benchmark 10-year government security rose to 6.73 per cent in early dealings as traders trimmed positions amid the weakening currency. The central bank subsequently bought bonds in the secondary market, helping ease yields, dealers said The 10-year yield settled 1 basis point lower than the previous close of 6.68 per cent.
“Most participants had cut losses, but towards the end of the session the RBI purchased heavily, both in the bond market and in the foreign exchange market,” said a dealer at a primary dealership.
The central bank bought ₹2,815 crore of government bonds in the secondary market on February 18, the latest data showed. In the week ended January 23, it had purchased ₹12,655 crore of bonds in the secondary market.