Indian Rupee Stabilizes as RBI Intervenes Amid US-Iran Conflict

The Indian rupee reached an all-time low of 96.96 per dollar on May 20, 2026, before stabilizing near 95.63 by July 30. This depreciation was driven by external shocks, including a surge in Brent crude prices above $95 per barrel following the resumption of hostilities between the United States and Iran.

Sanjay Malhotra, Governor of the Reserve Bank of India, stated that the currency is now undervalued in both nominal and Real Effective Exchange Rate terms. He argued that the weakness does not reflect India's underlying economic strength, characterized by growth exceeding 6%. To curb excessive volatility, the Reserve Bank of India conducted strategic dollar sales in onshore and offshore markets and implemented hedging incentives.

Currency stability remained precarious due to ongoing military escalations. The Islamic Revolutionary Guard Corps struck three tankers in the Strait of Hormuz, while the United States Armed Forces later launched a heavy wave of strikes against Iranian targets in response to a missile attack on a US base in Jordan.

Market movements also tracked the United States Federal Reserve. On July 30, the Fed maintained interest rates between 3.50% and 3.75%, with Chair Kevin Warsh noting that the fight against inflation is ongoing. The rupee's recent recovery to the 95.60 range was supported by a drop in crude prices to approximately $85 per barrel and increased foreign capital inflows.