Rupee Ends at 94.05 Against Dollar, Real Effective Exchange Rate Lowest in 12 Years

While moderate depreciation can boost export competitiveness, experts warn that sustained weakness could harm the domestic economy.

The Wire Staff

While moderate depreciation can boost export competitiveness, experts warn that sustained weakness could harm the domestic economy.

rupee ends at 94 05 against dollar real effective exchange rate lowest in 12 years

A person counts Indian rupee notes in Siliguri on February 25, 2026. Photo: PTI.

New Delhi: As the falling Indian rupee inches crosses the 94 mark against the US dollar, it has lost almost 9% over the last year, a report notes.

The rupee fell to end at 94.05 against the dollar today. A day ago, it had touched 93.76, largely thanks to the steep global crude oil prices.

This comes amidst speculation that the rupee could go past the 98 per dollar mark according to analysts at Bernstein.

The Hindu Businessline's Sourashis Banerjee reports that by February 2026, the real effective exchange rate (REER) of the rupee, which adjusts for inflation and measures the rupee against a basket of 64 currencies, fell to its lowest level since July 2014.

While moderate depreciation can boost export competitiveness, experts warn that sustained weakness could harm the domestic economy.

Chief Economist at Bank of Baroda Madan Sabnavis is quoted as having said that depending on the inflation numbers that come out for March, "the REER can fall further relative to the NEER [nominal effective exchange rate].”

Anindya Banerjee of Kotak Securities explained that even before the US and Israel attacked Iran, sparking off the West Asian conflict, the rupee was deliberately kept undervalued by the Reserve Bank of India to support trade competitiveness in a low-inflation environment.

"Before the war the rupee was already one of the weakest and under-valued currencies. In a way it was a deliberate ploy by the RBI, to use the currency as an effective tool to fight the trade war conditions, made possible by the prevalent low-inflation in our economy," he said.

However, the sharp rise in global oil prices, from about $65 to $113 per barrel following the crisis, triggered a surge in dollar demand, putting additional pressure on the rupee. With rising bond yields and significant foreign portfolio investor outflows, the RBI has no choice but to allow the rupee to act as a “shock absorber," the report quotes Banerjee as having said.

While stabilisation in oil markets may help recovery, excessive depreciation risks hurting consumption, the report notes.

This article went live on March twenty-fifth, two thousand twenty six, at twenty-nine minutes past two in the afternoon.

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