The rupee weakened against the dollar on Wednesday as oil prices rose 3% on renewed air strikes conducted by the US and Iran.

The Reserve Bank of India (RBI) likely intervened in the market to defend the rupee from falling further.

A media report that the government is planning to cut taxes for foreign bond investors and removing caps on the overseas ownership of some bonds towards the end of the trading session may have also turned positive for the rupee.

The rupee ended Wednesday at 95.7050 per dollar, down 0.46% ⁠from its previous close of 95.2650.

The conflict in West Asia resumed with Iran launching ballistic missiles towards Kuwait and Bahrain. The US conducted strikes on Iran's Qeshm Island. 

The rupee has been the worst-performing currency in Asia in 2025, triggering the RBI to introduce measures to deter speculative trading on 27 March this year. The conflict in West Asia has led to new pressures on the Indian currency.

Foreign fund outflows and punitive trade tariffs imposed by the US have led to the weakening of the rupee last year.

The rupee has hit historic lows in 2026, touching nearly 97 per dollar before recovering to fall again. Some currency traders are even expecting the rupee to touch the 100-per-dollar mark over time.

A weak rupee means India has to pay more for its oil imports, mainly in dollars. This further weakens the rupee, widens the trade deficit and fuels inflationary pressures. India is the world’s third-largest importer of crude oil, buying to meet around 90% of its oil demand. 

A weaker rupee is also one of the reasons which has led to the flight of foreign capital from local equity markets.