Rupee at all-time low of 95.50 against US dollar:India braces for higher inflation with growing strength of USD

The Indian rupee fell to a record low of 95.50 against the US dollar on Tuesday, 12 May 2026, amid several global and domestic headwinds. The rupee declined 19 paise against the USD as concerns over geopolitical tensions, rising crude prices, widening trade deficit, foreign capital outflows, and strengthening US dollar plague the currency market. The Brent crude prices surged over $105 per barrel after US President Donald Trump termed the Iran ceasefire proposal “weak”. Rupee’s slide continued after it closed at 95.31 on Monday. Last week, it had touched a low of 95.43 against the US dollar. The rupee has been constantly under pressure this year. In December 2025, rupee had crossed the 90 mark against the USD for the first time. Major reasons for rupee’s decline Geopolitical tension: Tension has increased in the Gulf countries after US President Donald Trump called the ceasefire with Iran “weak”. Due to fears of war continuing, investors are withdrawing their money from emerging markets, like India, and moving towards safe investments. Surge in crude oil prices: Due to the Iran crisis, there are fears of supply disruptions in the global market. Because of this, Brent crude oil prices have crossed $105 per barrel. India imports approximately 80% of its oil requirements, which means when oil becomes expensive, demand for dollars increases and the rupee weakens. Rising trade deficit: When crude oil prices increase, India’s import bill also rises. This raises concerns about the country’s ‘Current Account Deficit’ (CAD) increasing, which directly reduces the value of the rupee. Dollar strength: In an atmosphere of global uncertainty, the ‘US Dollar’ is considered the safest asset, i.e., a safe haven. After Trump’s tough stance, demand for the dollar has increased in markets worldwide, putting pressure on the rupee and other currencies. Foreign investor withdrawal: When global risks increase, foreign portfolio investors withdraw their investments from the Indian stock market and take them back in dollars. Due to dollars leaving the market, the value of the rupee falls. Expensive dollar raises risk of higher inflation in India The Middle East conflict is being considered the most serious energy crisis in decades, which is directly impacting India. Oil prices: With crude oil becoming expensive, India’s import bill has increased. Essential goods expensive: Supply of LPG, plastic and other petrochemical products affected. Higher inflation: As the dollar becomes expensive, petrol-diesel and imported goods will become costlier, which may increase retail inflation. Traveling abroad becomes expensive: Now more rupees will have to be spent on buying dollars for going abroad or for education. Electronics items become expensive: Mobiles, laptops and imported parts may become costlier, as payment is made in dollars. Oil production at lowest level in two decades According to a Reuters survey, OPEC countries’ oil production in April was at its lowest level in the past two decades. Saudi Aramco’s CEO Amin Nasser has warned that due to disruption in oil exports from the Strait of Hormuz, it may take until 2027 for the market to stabilize. This is causing a loss of approximately 10 crore (100 million) barrels of oil every week. Investment bank JP Morgan has stated in its report that even if the Strait of Hormuz opens next month, oil prices will remain around $100 this year. The report mentions that even after the route opens, it will take time for supply to normalize due to logistics and tanker shortages. Impact on India: PM Modi appeals for restraint India imports 85% of its oil needs, therefore rising crude oil prices are a matter of concern for the country. Prime Minister Narendra Modi has also appealed to citizens to exercise restraint in fuel consumption and gold purchases to reduce the pressure on the economy. Traders believe that further decline in the rupee may be seen in the coming time. How is currency price determined?