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Rupee under pressure: Factors behind Wednesday’s slide and what to watch todayThe rupee fell 56 paise to a record low of 92.05 against the US dollar on March 4, due to rising crude oil prices, a stronger dollar, and foreign outflows.By Anshul  March 5, 2026, 8:14:07 AM IST (Published)4 Min ReadThe rupee slumped 56 paise to close at a record low of 92.05 against the US dollar on Wednesday (March 4), capping its steepest two-day decline since May 2025. The fall reflected a mix of global and domestic pressures, with crude oil, dollar strength and foreign fund outflows converging at once.

Here’s a breakdown of what drove the slide and what could determine the currency’s path today and in the near term.

What led to Wednesday’s fall?

Spike in crude oil prices

The immediate trigger was a sharp rise in oil prices after US and Israeli strikes on Iran heightened fears of supply disruptions through the Strait of Hormuz.

Brent crude rose to around $82 per barrel in futures trade, extending gains since the escalation of tensions in West Asia.

For India, which imports over 80% of its crude requirement, higher oil prices translate into a larger import bill, wider trade deficit and elevated inflation risks. Currency traders said the spike in crude directly pressured the rupee as markets priced in higher macroeconomic risks.

Stronger dollar amid risk-off sentiment

The global flight to safety boosted the US dollar. The US Dollar Index crossed the 98 level, reflecting demand for the greenback against a basket of major currencies.

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said the escalation in the Middle East conflict reduced investor risk appetite globally. Higher oil prices increase inflation concerns and fiscal pressure on India, leading to selling in bonds and a stronger dollar bias.

A firm dollar typically weighs on emerging market currencies, including the rupee.

Foreign portfolio outflows and equity selloff

Heavy foreign selling in domestic equities compounded the pressure. Foreign portfolio investors sold shares worth ₹8,752.65 crore on a net basis during the session.

The broader risk aversion was visible in equity markets, with the BSE Sensex falling over 1,100 points and the Nifty 50 dropping nearly 400 points.

Dilip Parmar, Research Analyst, HDFC Securities, said the rupee’s sharp two-session decline reflects fears of persistent inflation and a widening current account deficit amid soaring energy prices.

What may determine today’s trade?

Movement in crude prices

Oil remains the most critical variable. If Brent crude extends gains, concerns over India’s trade balance and inflation could intensify, keeping the rupee under pressure.

Conversely, any signs of de-escalation in geopolitical tensions that cool oil prices may help the currency stabilise.

Dollar index trajectory

The rupee’s direction will also depend on whether the dollar index sustains levels above 98. Continued global risk aversion could keep the greenback strong, limiting recovery in emerging market currencies.

FPI flows and equity sentiment

Currency volatility often mirrors capital flows. Continued foreign selling in equities or debt could add to pressure on the rupee, while stabilisation in flows may provide near-term support.

Possible RBI intervention

Abhishek Bisen, Head Fixed Income, Kotak AMC, said higher crude prices could widen the current account deficit and reinforce inflationary pressures, raising the likelihood of RBI intervention to curb excessive volatility.

However, he noted that the rupee was already relatively weak on a real effective exchange rate basis, making disproportionate depreciation versus peers less likely unless geopolitical risks escalate further.

Going forward: Orderly adjustment or deeper slide?

Sachin Sawrikar, Founder and Managing Partner, Artha Bharat Investment Managers, said some degree of depreciation is not unusual in an interconnected financial system, particularly for an oil-importing economy. A calibrated weakening can support export competitiveness and help correct external imbalances.

But sharp or persistent weakness carries risks — including higher imported inflation, increased external debt servicing costs and potential deterrence to foreign portfolio inflows if currency losses outweigh yield advantages.

Technically, analysts see the rupee trading in a 91.50–92.75 range in the near term, with resistance around 92.60 and support near 91.80.

-With PTI inputsContinue ReadingNote To ReadersDisclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.TagsDollarRBIrupeerupee vs dollar