The rupee hit a fresh low against the dollar, while yield on the benchmark 10-year government bond surged past 7 per cent-mark on Thursday, tracking the rise in crude oil prices amid the West Asia crisis, said dealers.
Latest data released by the Reserve Bank of India (RBI) showed its net short position in the forward book crossed $100 billion, which in turn could exert pressure on the spot rupee.
The currency hit the day’s low of 95.34 per dollar before recovering on the back of intervention by the RBI via dollar sales, said dealers.
It settled at a new closing low for the second straight session at 94.92 per dollar against the previous close of 94.85 per dollar. The rupee breached the 95 per dollar mark for the first time on March 30, 2026.
On the other hand, the yield on the benchmark 10-year government bond rose up to 7.07 per cent during the day. It settled at 7.02 per cent, against the previous close of 6.99 per cent tracking the softening in crude oil prices by the end of the domestic trading hours, said dealers.
“Brent topping $120 per barrel caused panic, resulting in rupee hitting all time lows against the dollar,” said Abhishek Goenka, founder and chief executive officer (CEO) of IFA Global.
“The correlation between Brent and the rupee is likely to get stronger, the higher Brent goes. The real macro risk is currently under-appreciated, we believe. While Brent prices we see are financial futures, the spot rate, i.e., procuring a real physical barrel of crude is much higher. Freight rates have shot up and so have insurance costs. All this makes the situation extremely grim and rupee is just reflecting that,” Goenka added.
Brent crude oil prices rose up to $126 per barrel as US President Donald Trump rejected Iran’s offer to reopen the Strait of Hormuz. He said that he won’t lift the naval blockade until he secures a nuclear deal.
The rupee depreciated 4 per cent in March following the West Asia conflict, prompting the regulator to announce measures to curb speculative trades and volatility. As the impact of the measures faded along with a partial rollback of those steps, the Indian unit came under pressure again, falling 0.11 per cent in April. In 2026 so far, the rupee has depreciated 5.31 per cent against the dollar.
The RBI’s outstanding net short dollar position in the rupee forward market rose to $103.06 billion by the end of March, against $77.25 billion by the end of February, latest data by the central bank showed.
“Until the RBI unwinds its forward positions, FII inflows are unlikely to return. And without capital flows, the rupee will remain under pressure. In this environment, given the ongoing geopolitical tensions, the RBI’s forward book, and continued capital outflows, rupee will continue to remain under pressure,” said Amit Pabari, managing director at CR Forex.
Short positions in less than one year rose to $51 billion, against $28 billion earlier, while those in longer than one year tenure rose by around $3 billion to $52.8 billion during the same period.
Experts said that the rupee is expected to remain under pressure driven by a widening current account deficit and subdued capital inflows. Additionally, the import cover, when adjusted to include the forward book, has fallen to below nine months as of March 2026, limiting the buffer against external shocks.
“We continue to expect the rupee to depreciate, led by wider current account deficit and weak capital flows. RBI’s ability to use dollar sales to limit depreciation pressure is less due to elevated large forward book. Moreover, the import cover (forex reserves plus forward book) is less than 9 months in March 2026,” said Gaura Sen Gupta, economist at IDFC First Bank.
