USD/INR

In recent weeks, the Indian rupee has looked like a punching bag—hitting seven consecutive record lows, slipping close to 97 per dollar, and triggering waves of panic headlines in the local press. But if we step back from the day-to-day volatility and look at the broader picture, a more nuanced—and surprisingly less alarming—reality emerges.

ING analysts have examined the rupee's situation under a microscope and reached a clear conclusion: yes, the currency is likely to remain under pressure as long as oil prices stay elevated. However, the risk of a disorderly collapse—the kind that forces central banks into emergency rate hikes and sends the IMF scrambling to prepare rescue packages—appears limited. India has come a long way since 2013 and now stands on a much stronger foundation.

Back in 2013, when the Federal Reserve merely hinted at reducing monetary stimulus, the rupee plunged and India found itself on the brink of a balance-of-payments crisis. At the time, the current account deficit had reached nearly 5% of GDP, foreign exchange reserves were thin, and the country's dependence on oil imports seemed like a structural vulnerability.

Today, the picture is very different. ING expects India's current account deficit to widen to around 2.1% of GDP in 2026. For comparison, it was roughly 0.5% last year. The increase is driven almost entirely by higher oil prices. India still imports more than 80% of the crude oil it consumes, and when oil becomes more expensive, the import bill inevitably swells.

But a deficit of just over 2% of GDP is not the same as 5%. It remains a manageable level that does not threaten macroeconomic stability. Why? Because India has diversified its sources of energy supply. Whereas the country once depended heavily on a small group...

Monday on Asian currency markets began with a sight rarely seen in recent weeks — the dollar was retreating while currencies from Tokyo to Mumbai moved higher in unison. The U.S. dollar index slipped by two-tenths of a percent, and futures on the index fell by roughly the same amount. The move was modest, barely noticeable on the charts, but behind it stood a tectonic shift in sentiment. The reason was a few words spoken by Donald Trump over the weekend. Words that may have marked the beginning of the end of this year’s most destructive geopolitical crisis. And Asian currencies, being among the most sensitive barometers of global risk appetite, reacted instantly.

Over the weekend, the U.S. president made a statement markets had been waiting months to hear. The United States and Iran had “largely agreed” on a framework deal to resolve the conflict. The key point was the resumption of shipping through the Strait of Hormuz — the very artery whose blockade had sent oil prices soaring and triggered a global chain reaction of inflation. Separate sources added further detail: Iranian and Pakistani mediators also reported progress. The picture looked almost idyllic.

But Trump would not be Trump without adding a note of uncertainty to the optimism. Almost immediately after the encouraging statement, he clarified that he was in no hurry to finalize a deal. Iran, for its part, largely rejected U.S. demands regarding the transfer of enriched uranium stockpiles — one of the most contentious points in the negotiations. Contradictory signals, mixed messages, swings between hope and skepticism. Classic Trump diplomacy, in which no one knows until the very last moment whether an agreement will be signed or another escalation will follow.

Still, markets exhausted by months of uncertainty chose to focus...

Monday morning on India’s currency market began with the very thing everyone — from oil importers to owners of street stalls selling imported goods — had been desperately waiting for. The rupee, which only on Friday had been staring into the abyss near the 97-per-dollar mark, suddenly reversed course and began to climb. The USD/INR pair fell by half a percent to 95.70 — a move that may seem modest after weeks of relentless decline, yet one whose psychological significance can be compared to the first breath of air for a drowning man. And the reason for this reversal was neither market forces nor global macroeconomic shifts. The reason was a man. One man who uttered a few sentences in an interview with the newspaper Mint.

Sanjay Malhotra, governor of the Reserve Bank of India, is not known for making blunt public statements. Central bankers usually speak in shades, hints, and carefully crafted phrases whose interpretation has become a profession of its own. But this time, Malhotra seemed to cast diplomacy aside. His statement rang out like a gong: the rupee is undervalued. The RBI will do whatever is necessary to prevent further weakening of the currency.

“Whatever is necessary” is not a phrase central bankers throw around lightly. It is a signal that traders call a verbal intervention. And when it comes from the man controlling the foreign exchange reserves of the world’s seventh-largest economy, the market has no choice but to listen. Because words may be followed by action. And judging by recent developments, they already have been — last week the RBI actively intervened, steering USD/INR away from record highs. Malhotra made it clear these interventions were not a one-off operation,...

The 96.8650 level that USD/INR pierced this week is not just another number flashing across traders’ screens. It is a diagnosis. Seven consecutive all-time highs are not how healthy markets behave during temporary stress — this is how a system behaves when some fundamental safeguard has broken down. The rupee has fallen before; there have been crashes and speculative panics. But the current situation stands out for its relentless, almost hopeless consistency. The currency is not merely weakening — it is losing the ability to find a bottom. And while the world watches the standoff in the Strait of Hormuz with fascination, the real drama is unfolding not on the decks of destroyers, but in the corridors of the Reserve Bank of India and on the balance sheets of Indian importers staring in horror at their dollar-denominated invoices.

The entire structure of the Indian economy resembles a building erected on barrels of crude oil. This is neither exaggeration nor literary metaphor. India is the world’s third-largest oil consumer, yet unlike the other members of this uneasy top three, it possesses very little domestic production. More than 80% of the oil the country consumes is imported, sending foreign currency flowing to Saudi Arabia, Iraq, and — in less tense times — Iran.

When oil trades around seventy dollars a barrel, this structure can still maintain balance. But when prices surge by more than fifty percent in just a few months, as they have since late February, the current account begins to crack under the pressure.

The mechanics of this destruction are simple and ruthless. Indian refiners now require far more dollars to pay for the same physical volume of imports. They enter the foreign exchange market and aggressively sell rupees to buy U.S. currency....