The Indian rupee weakened sharply on March 2, breaching the 91-per-dollar mark as surging crude oil prices and a global risk-off mood triggered heavy dollar demand, prompting intervention by the Reserve Bank of India to curb volatility. The currency opened near 90.97 against the US dollar and quickly slipped past the psychologically significant 91 level in early trade, reflecting pressure from higher energy prices and a strengthening greenback.
The rupee touched intraday lows of around 91.32, with dealers reporting strong importer demand for dollars and buying by foreign banks amid escalating geopolitical tensions in the Middle East.
The spike in Brent crude futures over the weekend intensified concerns about India’s current account deficit and inflation outlook, given the country’s heavy reliance on energy imports. At one stage, the currency was quoted as weak as 91.47 before trimming some losses.
As oil climbed and the US dollar strengthened globally, portfolio outflows from domestic equities compounded the rupee’s strain. Traders cited foreign portfolio investor selling, including month-beginning rebalancing flows, which amplified pressure on the currency.
The slide in the rupee coincided with declines in domestic financial markets, with the BSE Sensex and the Nifty 50 each falling more than 1 percent amid broader risk aversion. Government bond yields edged higher on concerns that sustained high oil prices could complicate the inflation trajectory and narrow room for monetary easing.The RBI stepped in through state-run banks, offering dollars in both spot and forward markets to smooth volatility rather than defend a specific level. Market participants said the intervention was measured, aimed at preventing disorderly moves and curbing speculative positioning, even as the central bank allowed the currency to adjust to external pressures.
Currency analysts said oil had become the dominant driver of the rupee’s near-term direction. “In the very short term, till oil comes down, the rupee could head to 93–94 levels. Right now everything is a play on oil,” says Anindya Banerjee, head of commodity and currency research at Kotak Securities.
He further adds that unless crude retreats meaningfully from current elevated levels, pressure on the rupee is likely to persist, particularly given India’s status as a large net oil importer.
Banerjee adds that while the RBI has been active in smoothing volatility, it is unlikely to stand in the way of a fundamentally oil-driven move if global energy prices remain elevated. He notes that the rupee’s losses on the day were relatively contained compared with several emerging market peers, many of which saw sharper percentage declines against the dollar amid the global flight to safety.
Timely central bank action and India’s comfortable foreign exchange reserves helped limit the damage, Banerjee says.
Despite the day’s weakness, analysts pointed out that the rupee has performed relatively well in recent weeks following the announcement of the interim India–US trade agreement framework in February.
The deal, which envisaged tariff reductions and improved market access, had lifted investor sentiment and supported the currency, with the rupee rallying in the immediate aftermath of the announcement. That underlying support has helped cushion volatility even as global headwinds resurfaced.
Dealers say that oil marketing companies were active buyers of dollars to hedge rising import costs, while some exporters held back sales in anticipation of further depreciation, adding to intraday volatility. The breach of 91 carried psychological weight, triggering stop-loss orders and reinforcing bearish momentum in early trade.
By the close, the rupee had stabilised somewhat but remained weaker on the day, ending around the 91.4–91.5 range. Traders said the near-term trajectory would hinge largely on oil price movements and geopolitical developments, with portfolio flows and global dollar strength also playing a role.
For now, market consensus suggests that until crude prices cool meaningfully, the rupee will remain highly sensitive to every move in the oil market.
First Published: Mar 02, 2026, 19:05
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