US-Iran war: Will rupee hit 100 versus US dollar soon?

Down over 7% in 2026 alone, rupee has become Asia’s worst-performing currency. (AI image) “…the whole thing is that ki bhaiya, sabse bada rupaiya”. Why is the rupee falling? First, the US-Iran war pushed Brent crude past $100 forcing oil companies to flood the market to buy dollars. Second, Third, Finally, Oil imports - slippery slope for rupee Foreign Portfolio Investors Turn Away Dollar is getting stronger Gold adds to woes Trade Deficit is widening Will the rupee touch 100 anytime soon? What can be done to stem the fall? The government could consider bringing back more attractive yielding sovereign gold bonds and opening them up for NRI investments too. Tax incentives for housing to increase demand for home loans to wean investable surplus of households from gold to real estate could also be explored. Short-term attractive dollar deposit schemes for NRIs with government underwriting and taking a hit on fiscal for the same could also be explored. Incentives to importers on bilateral rupee settlement of their imports through barter mechanisms could also be explored for a short window. The Public Sector Enterprises should be urged to invest in coal gasification, fertiliser production and gold exploration/beneficiation of gold ores that may have become more viable now with the increase in gold prices. The government could also consider viability gap funding based PPP projects to set up EV charging infrastructure across the country to give a fillip to EV adoption. The rupee may not be in triple digits yet - but warning signals for a structurally weak currency are in place. The task is cut out for both the government and the RBI to keep the rupee from hitting a century, while keeping the domestic growth story intact. Economists are confident about India’s economic resilience and domestic-demand driven growth story to soften the blow. At a time when the rupee is touching all-time lows every day, the lyrics from a Bollywood movie are ringing true:Because in the current scenario of US-Iran war and geopolitical turmoil, for India the biggest headache and nightmare is emerging in the form of rupee’s free fall versus the US dollar.Rupee depreciation is not new, what is new however is the rapid pace at which it is falling. It’s the biggest risk for India’s external sector resilience at the moment. In just over a year, the rupee has depreciated over 14%, tumbling from 85 in March 2025 to a record low of almost 97 this week. Down over 7% in 2026 alone, it has become Asia’s worst-performing currency.In fact, the recent decline has sparked concerns: will the rupee hit 100 per dollar soon? In the one-year forward market, the rupee breached the 100 level on Wednesday. A one-year outright forward spot rupee transaction tells us the expected exchange rate for a settlement one year from now.First let’s understand why a falling rupee is a matter of concern for the economy. When the rupee depreciates, it increases the cost of imports. Items like crude oil, chemicals, electronics, machinery, fertilisers become expensive. This in turn leads to inflation in the form of rising fuel, transport and food prices.Outflow of dollars for more payments causes the foreign exchange reserves to go down, especially at times when the Reserve Bank of India (RBI) intervenes to stabilize the rupee. Also, foreign loans, overseas borrowings become more expensive for companies and individuals. All this feeds into the economic cycle, eventually slowing growth while raising inflation - a pressure situation for the government and the RBI.Which is not to say that a depreciating rupee is always bad. Within limits it works in favour of exports, making them cheaper for the importing country. Even NRIs who send money home are able to send more in terms of rupee.Vedika Narvekar, Research Analyst - Commodities & Currencies, Anand Rathi Shares and Stock Brokers points out some factors that are causing the current spree of rupee depreciation, leading to structural pressures.“What looks like a sudden currency crisis is actually the combined weight of five different global economic pressures hitting India’s external balances all at once,” she tells TOI.panic has sparked a global flight to safety, foreign investors have pulled a record $21 to $23 billion out of local equities in 2026.steep US tariffs on Indian exports have choked our dollar inflows. Our trade deficit hit a record $41.68 billion in late 2025 and remains widened with April trade deficit jumping to $28.38 billion vs estimated $25.97 bn in March.the interest differential. As Indian bonds yield less relative to US bonds, global capital finds India less attractive and money flows out of India.Let’s take a look at some factors in detail:The biggest factor that is weighing on the rupee at present is crude oil prices above $100 per barrel. India imports almost 90% of its oil needs - hence a rise in crude prices has a direct impact on its import bill. To purchase the same amount of oil, more dollars are requ