The Indian rupee weakened sharply to a historic low of 96.35 against the US dollar on May 18, 2026, amid escalating geopolitical tensions in West Asia and a surge in global crude oil prices. The depreciation has intensified concerns over India’s external sector stability, inflationary pressures, and widening trade imbalance.
Major Highlights
- The Indian rupee touched an all-time intraday low of 96.35 against the US dollar during trading on May 18, 2026.
- International crude oil prices rose significantly, with Brent crude crossing 111 US dollars per barrel after reports of a drone attack near the Barakah Nuclear Power Plant in the UAE.
- Regional tensions intensified further after Donald Trump rejected a proposed peace initiative involving Iran, describing it as unacceptable from a security perspective.
- Foreign Portfolio Investors withdrew more than ₹2.2 lakh crore from Indian equity markets during 2026, reducing the availability of foreign currency and increasing pressure on the rupee.
- To conserve foreign exchange reserves, the government increased the basic customs duty on gold and silver imports from 6 percent to 15 percent on May 13, 2026.
- On May 16, 2026, the Ministry of Commerce shifted silver imports to a licensed import regime in an effort to reduce non-essential foreign exchange outflows.
- India’s merchandise trade deficit widened to 28.4 billion US dollars in April 2026, further increasing stress on the current account balance and the domestic currency.
- The Reserve Bank of India intervened in the foreign exchange market by selling US dollars and tightening regulations related to banks’ net open foreign exchange positions.
- The US Dollar Index remained strong near the 99 mark, indicating broad global strength of the dollar against emerging market currencies, including the Indian rupee.
- Domestic stock markets reacted negatively to the currency decline, with the Sensex falling by 833 points and the Nifty dropping by 234 points during Monday’s trading session.
Important Terms
- Current Account Deficit (CAD): A situation in which a country’s imports of goods, services, and transfers exceed its exports, resulting in net foreign exchange outflow.
- FPI Outflows: Withdrawal of investments by Foreign Portfolio Investors from domestic financial markets, often leading to currency depreciation and market volatility.
- Managed Float Exchange Rate: An exchange rate system in which the value of a currency is largely determined by market forces, but the central bank may intervene occasionally to reduce excessive volatility.
