The Indian rupee slipped to yet another lifetime low on May 20 as surging global bond yields, elevated crude oil prices, and relentless selling by foreign institutional investors (FIIs) continued to weigh on investor sentiment.

The rupee declined by 43 paise to touch a fresh low of 96.96 against the U.S. dollar, breaching its previous all-time low of 96.615 hit in the last session. Extending its losing streak to seven consecutive sessions of record lows, the local currency opened 33 paise weaker at 96.86 against the dollar after closing at a record low of 96.53 in the previous session.

The currency has plunged nearly 6% since the Iran war began in late February, emerging as the worst-performing currency among Asian peers.

Rising U.S. bond yields also added pressure on the rupee. The yield on the benchmark U.S. 10-year Treasury stood at 4.66%, while the 30-year Treasury yield surged to 5.19%, its highest level in nearly 22 years.

According to Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, persistent strength in crude oil prices and pressure on capital flows are keeping the rupee under stress.

“Elevated crude oil prices are raising concerns over India’s import bill and widening trade deficit, which is weighing on sentiment for the rupee. Market participants continue to prefer dollar buying and rupee selling as a hedge against ongoing volatility and external sector pressure,” Trivedi said. He expects the rupee to trade in the 96.25–97.00 range in the near term.

Abhishek Bisen, Head of Fixed Income at Kotak Mahindra Asset Management Company, said the rupee has come under intense pressure amid geopolitical tensions in West Asia and elevated oil prices.

“Rising crude prices, currently hovering around $110 per barrel, have sharply increased dollar demand and weakened risk appetite, making the rupee one of the weakest-performing Asian currencies,” Bisen said.

He added that while the rupee appears relatively undervalued on a real effective exchange rate (REER) basis, near-term movements are likely to remain closely tied to oil price trends due to India’s heavy import dependence. “Unless geopolitical tensions ease materially and commodity prices soften, the rupee is expected to remain range-bound with intermittent volatility despite policy interventions,” he said.

Analysts see rupee breaching 98 mark

According to market experts, the Indian currency may breach the 98 mark against the U.S. dollar if crude oil prices touch $120 per barrel in FY27. According to a report by CareEdge Ratings, the escalation in West Asia has increased demand for safe-haven assets, further pressuring emerging market currencies.

This has weighed on currencies such as the Philippine peso, Indian rupee, South African rand, Thai baht, Korean won, and Indonesian rupiah, as these economies remain heavily dependent on West Asia for energy imports.

The agency expects the USD/INR exchange rate to average between 92 and 93 in FY27, assuming crude oil prices average around $90 per barrel. However, it warned that if crude oil prices remain in the $100–$120 per barrel range due to a prolonged geopolitical conflict, the rupee could face significantly higher depreciation pressure, with the exchange rate potentially testing levels between 94 and 98.

On Tuesday, crude oil prices eased slightly, with West Texas Intermediate (WTI) settling near $104 per barrel and Brent crude around $111 per barrel, as improving diplomatic signals reduced some of the geopolitical risk premium.