Rupee slides to 92-plus as West Asia crisis fires up safe-haven dollar demand; RBI likely to step in: Naveen Mathur – News Air Insight

The Indian rupee came under sharp pressure in early trade, tumbling roughly 1% to quote above 92 against the US dollar, as the widening conflict in the Middle East drove a global flight to safety and pushed investors firmly into the greenback. Naveen Mathur, Director of Commodities, Currencies and International Business at Anand Rathi Share & Stock Brokers, said the currency now carries a clear depreciative bias with little near-term relief in sight.

“The Middle East tensions are taking a different toll altogether,” Mathur told ET Now. “The equity markets are not doing well. FPI outflows would be very critical for the rupee, and policy decisions by India would also be seen as a step ahead to actually curtail the downside.”

Dollar strength compounds the pressure

The rupee’s weakness is not playing out in isolation. As geopolitical risk intensifies, the dollar is drawing support from its traditional safe-haven status — a dynamic also lifting the Japanese yen and the Swiss franc. The rising Dollar Index is directly amplifying the rupee’s decline, squeezing it from both sides: capital outflows from domestic equity markets are weighing on demand for the currency, while external dollar strength is making the exchange rate worse regardless of local fundamentals.

“The dollar index, the Japanese yen, the Swiss franc — all safe-haven currencies are quite positive. There is bound to be appreciation in the dollar index because of safe-haven demand,” says Mathur.

Why the RBI is expected to step in

India’s structural vulnerability to oil price shocks makes currency defense a near-necessity for policymakers. Between 80% and 88% of the country’s crude oil imports originate from Gulf nations — the precise geography at the centre of the current crisis. A sustained depreciation in the rupee would directly inflate the import bill, widen both the current account deficit and fiscal deficit, and feed broader inflationary pressure through fuel and freight costs.

Mathur expects the Reserve Bank of India to intervene in the foreign exchange market to slow the rupee’s slide. However, he acknowledged that the RBI’s ability to meaningfully reverse the trend is limited while the global risk-off sentiment remains entrenched and safe-haven dollar demand continues to dominate currency markets. The central bank is more likely to smooth volatility than to engineer a sustained recovery in the near term.

With FPI sentiment already fragile following months of outflows, any further escalation in West Asia carries the risk of accelerating the currency’s decline. Mathur’s outlook remains cautious: unless geopolitical conditions stabilise swiftly, the rupee faces sustained downward pressure, and the cost of inaction for policymakers will only grow.