Rupee Rollercoaster: Navigating the FY26 Currency Crisis

In FY26, the Indian rupee faced its sharpest decline against the US dollar in 14 years, driven by foreign fund outflows, high crude oil prices, and global dollar strength. This depreciation was different from FY12's downturn, caused by external geopolitical and economic factors, influencing the rupee's record low exchange rate.

The Indian rupee faced a tumultuous year, depreciating by 9.88% against the US dollar in FY26, marking its steepest fall in 14 years. The depreciation was attributed to foreign fund outflows, elevated crude oil prices, and a strengthening dollar worldwide, reminiscent of the 12.4% decline in FY12.

This depreciation was externally driven, as opposed to FY12's domestically influenced downturn. Factors such as geopolitical tensions and capital outflows were seen as the 'perfect storm' that influenced the rupee's decline, according to Sunal Sodhani of Shinhan Bank India.

Despite interventions by the Reserve Bank of India, including the sale of over USD 55 billion to stabilize the currency, the rupee continued to hit historic lows, closing at 94.78 against the dollar. Experts predict continued volatility, projecting a trading range between 92 and 97 against the US dollar for FY27.