Rupee eyes 26 per dirham as oil shock strains RBI firepower

The Indian rupee is coming under renewed and intensifying pressure as surging oil prices, escalating geopolitical tensions in the Middle East, and persistent capital outflows combine to push the currency towards fresh record lows — with Goldman Sachs warning it could weaken to 95 against the US dollar in the coming months, equivalent to roughly Rs25.8-26 per UAE dirham.

- Issac John

The currency's slide is being compounded by foreign portfolio outflows, with overseas investors pulling billions of dollars from Indian equities amid global risk aversion. — FILE PHOTO

The rupee slipped to a record low of 92.63 per dollar this week and continues to hover near historic lows despite intermittent recoveries driven by central bank intervention. Offshore markets are already signalling further weakness, with non-deliverable forwards indicating levels beyond 93 as oil prices spike and risk sentiment deteriorates.

The latest bout of weakness has been triggered by a sharp surge in crude prices — now above $110 per barrel — following attacks on energy infrastructure across the Gulf. For an import-dependent economy like India, which sources over 80 per cent of its crude requirements from overseas, the impact is immediate and severe: a ballooning import bill, widening current account deficit, and rising demand for dollars.

Goldman Sachs has turned increasingly cautious, projecting the rupee could slide to 95 per dollar within a year as the oil shock reverbates through India’s external balances. The bank has also trimmed India’s growth forecast to around 6.4-6.5 per cent while raising its inflation outlook, warning that elevated energy prices could weaken domestic demand and corporate profitability.