Dollar Nears ₹100? RBI Faces Toughest Currency Challenge Yet

Key Takeaways

• The Indian rupee is expected to go up to 97.5 against the US dollar by the end of 2026, as per ANZ Research. This is due to high crude oil prices, outflow of foreign investments, and an escalated current account deficit.
   
• The rupee recorded an all-time low of 95.73 on May 12, 2026. The Reserve Bank of India is trying to sell off dollars and revive the NRI deposit scheme.

The Indian currency witnessed an all-time low level of 95.73 in relation to the US dollar in the interbank foreign exchange markets on May 12, 2026. 

This decline is caused by soaring crude oil rates and the increasing risk of the volatile US-Iran cease-fire. 

The analysts at ANZ Research predict that the Indian currency will be valued at 97.5 against the US dollar by the end of 2026.

From the short-term perspective, this indicates increased costs for importing goods and other products into India. 

From the long-term perspective, such currency fluctuations might lead to inflation in India and problems with the country's trade balance. 

Currently, the currency rate of the rupee has fallen by 5.48% in the calendar year against the US dollar.

What Does a Weaker Rupee Mean for You?
 

A falling rupee directly raises costs for everyday Indians. Fuel prices could go up as India imports most of its crude oil. Foreign education fees and overseas travel will become more expensive. 

However, one silver lining exists: Indian exporters, especially in IT and manufacturing, earn more in rupee terms when the dollar is strong.
 

Foreign investors have pulled out around $20.6 billion so far in 2026, exceeding total outflows for all of 2025. This has added direct pressure on the rupee.

What Experts Say and What the RBI Can Do?

Dhiraj Nim, Economist and FX Strategist at ANZ Research, told CNBC-TV18 that the RBI is unlikely to let the rupee touch 100. “We do not think that the RBI will let the rupee go to that 100 level in the near future,” he said. He added that a rupee at 100 would complicate inflation and force a policy shift.

Nim also noted that “every option for the RBI is on the table,” including FCNR(B) deposit schemes and interest rate hikes. Market participants say the RBI may revive an FCNR deposit scheme similar to 2013, which had mobilised around $38 billion over three years by attracting dollar deposits from non-resident Indians. 

The RBI has also capped banks’ net open onshore positions at $100 million and banned banks from offering non-deliverable derivatives to residents as immediate steps to curb volatility.

Conclusion

The rupee is under real and sustained pressure. ANZ’s forecast of 97.5 by year-end signals more weakness ahead, but a managed one. RBI is well equipped with means, and they have also shown a willingness to employ them. For the time being, crude oil prices and the US-Iran standoff will be the key points. 

FAQs

Why is the Indian rupee falling so sharply against the US dollar in 2026, and how will it affect inflation in India?

A weak rupee makes foreign goods more expensive for India, especially crude oil, electronic items, and machinery bought from other countries. Higher oil prices and consistent sales by foreign entities have added pressure to the rupee recently. With increasing costs of imports, businesses raise prices, resulting in increased prices of fuel, transportation, and everyday commodities for the masses.

In case the dollar appreciates near ₹100, what measures can be taken to strengthen the rupee position?

The Reserve Bank of India can conduct sales of dollars in the foreign exchange market.  The other way to do so is by increasing the inflow of foreign currencies via NRI deposit accounts. This can be done by increasing the interest rate and imposing stricter regulations in the foreign currency market. Apart from that, low oil prices and new foreign investments will also contribute to stabilizing the currency.