The rupee’s fresh all-time low of 95.43 against the dollar – with onshore spot currently at 95.34 – is a direct reflection of the unrelenting pressure from West Asia. Hormuz remains the single biggest factor governing oil and gas prices, and elevated crude is exerting a dual squeeze on the rupee. On the current account, India’s monthly energy import bill – which averaged $10-11 billion before the war – has jumped 70-80%. On the capital account, FPI outflows have totalled around $21 billion since the conflict began. The combination is forcing the RBI to defend the currency aggressively in both spot and forwards, and it remains the only meaningful force standing between the rupee and a sharper depreciation. Yet despite that defence, the rupee continues to underperform its EM peers – which is precisely why it now screens as fundamentally undervalued on most measures.
From here, everything is a trade on Hormuz. As long as those flows remain constrained, Brent can eventually push toward $125-130, and that would open up 97.00-97.50 on USDINR, with 95.00 and 94.50 acting as major supports on any pullback. The undervaluation will only start to correct – and the rupee will only meaningfully recover – once Brent eases back below $100 and capital flows turn supportive again. Until then, the path of least resistance for spot remains higher.