The Indian rupee’s valuation versus other major currencies, calculated on a trade-weighted basis, has fallen to its ​lowest in more than a decade, hit by the Iran war-driven surge in ‌crude oil prices and chunky foreign portfolio outflows.

The South ​Asian currency’s 40-currency real effective exchange rate, which accounts for ⁠inflation differentials between different economies, fell to 92.72, the Reserve Bank of India’s latest bulletin released late on Thursday (April 23, 2026) showed.

The REER is now hovering well ‌below its long-run average of 98.25, pointing to a deeply undervalued rupee against historical norms.

Relatively subdued inflation in India has ‌weighed on the REER in recent months, adding to the ‌impact ⁠of the rupee’s roughly 4.5% year-to-date decline, analysts said. The ⁠currency hit a record low of 95.21 per dollar in late March.

Despite the extent of the rupee’s undervaluation, analysts see little near-term scope for a recovery.

While the rupee ​is highly undervalued on a ‌REER basis relative to historical ranges, it is likely to remain under pressure in the near term due to dollar demand “from ramp-up in oil imports to secure supplies and by sizeable equity outflows amid ‌heightened risk aversion,” analysts at BofA Global Research said in ​a note.

The March reading caps a roughly 15-point decline from late-2024 highs, marking one of the sharpest real ⁠depreciations episodes in years.

A weaker real-effective exchange rate helps make exports out of India more competitive, while increasing the cost of imports. It also offers ‌foreign investors a cheaper entry point to the currency, even while hitting the value of their existing investments in Indian equities and fixed income in foreign currency terms.

A narrower six-currency gauge suggests the rupee’s undervaluation is starker. The rupee’s 6-currency REER declined to 89.61 in March, the lowest on record for data going back to April 2015 ‌and well-below the series average of nearly 100.

The U.S., China, United Arab Emirates, ​Russia, Saudi Arabia and Singapore were the country’s 6-largest trading partners in the 2024-2025 fiscal year, trade ministrydata show.

“For ⁠long-term investors, the rupee’s current valuation provides an attractive entry point,” V. Anantha ⁠Nageswaran, India’s Chief Economic Adviser, told Bloomberg News on Thursday (April 23, 2026).

The RBI has assumed a dollar-rupee exchange rate of ‌94 in its forecasts for fiscal year 2026-27. A 5% depreciation from those levels would add about 40 bps to inflation and ​25 bps to growth, per RBI estimates.

The rupee rose 9 paise to 87.79 against the dollar in early trade on Friday (October 24, 2025), bolstered by a drop in global crude oil prices and optimism around an India-U.S. trade deal.

However, FII outflows prevented sharper gains, forex traders said.

At the interbank foreign exchange, the rupee opened at 87.78 against the U.S. dollar before dropping marginally to 87.79, down 9 paise from its previous close.

The rupee appreciated 5 paise to close at 87.88 against the U.S. dollar on Thursday (October 23).

“The Reserve Bank of India was again present at 87.95 yesterday [Thursday, October 23], ensuring that the rupee does not cross 88.00 level and the rupee closed with optimism of a U.S.-India trade deal at its peak. Global sentiment remains mixed as oil prices move higher,” Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP, said.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.08% higher at 99.01.

Brent crude, the global oil benchmark, was trading lower by 0.55% at $65.63 per barrel in futures trade.

“After gaining more than 5% on Thursday (October 23) due to U.S. sanctions on two Russian oil companies exports (which account for over 5% of the total world oil output), Brent oil prices were stable at $65.63 per barrel and set for its biggest weekly gain since June 2025. Prices are higher by 7% on a weekly basis, reflecting one of the most significant weekly rebounds in about 4 months,” Mr. Bhansali added.

On the domestic equity market front, Sensex declined 153.18 points to 84,403.22 in early trade while the Nifty was down 51.1 points to 25,840.30.

Foreign Institutional Investors sold equities worth ₹1,165.94 crore on Thursday (October 23), according to exchange data.