Why the Indian Rupee, Philippine Peso, and Sri Lankan Rupee Are Sliding to Record Lows

Countries such as India and the Philippines are particularly exposed because of their dependence on imported crude. As oil surged, currencies like the rupee and the Philippine peso fell sharply alongside other emerging‑market currencies.

Iran and the Strait of Hormuz Add a Geopolitical Risk Premium

The geopolitical backdrop has intensified the shock. Escalating tensions involving Iran—and fears of disruption around the Strait of Hormuz, one of the world’s most important oil shipping routes—have pushed oil prices higher and increased investor risk aversion.

Asia is especially vulnerable: a large share of the region’s oil imports travels through the Strait of Hormuz, making supply disruptions a direct threat to economic stability.

Since the outbreak of the conflict earlier in 2026, the Indian rupee alone has weakened roughly 4.5%, mirroring declines across several Asian currencies.

How Individual Currencies Are Reacting

Indian Rupee

The rupee has been among Asia’s weakest major currencies this year. Traders report that the Reserve Bank of India has likely intervened periodically in foreign‑exchange markets to limit volatility after the currency hit new record lows.

Pressure comes from three channels simultaneously: a higher oil import bill, portfolio outflows, and rising inflation risks tied to energy costs.

Philippine Peso

The Philippine peso has also weakened as investors move into the dollar during periods of geopolitical stress. In one recent session it slipped to around 61.48 per U.S. dollar.

Authorities have responded partly by using foreign‑exchange reserves to stabilize markets. Since the conflict began, the Philippines’ reserves have reportedly fallen about 8.1% to roughly $104 billion as policymakers spent funds defending the currency and managing volatility.

Sri Lankan Rupee

Sri Lanka has taken a different approach—reducing demand for foreign currency by discouraging imports.

In May 2026, the government imposed a 50% surcharge on vehicle imports (excluding motorbikes and three‑wheelers) for three months. The policy aims to delay purchases of imported cars and conserve scarce foreign‑exchange reserves while the rupee remains under pressure.

Officials said the measure is intended to reduce immediate demand for dollars and protect the country’s foreign‑exchange position during the current external shock.

The Policy Toolkit: How Governments Are Responding

Across Asia, central banks and governments are using several tools to slow currency declines:

• Foreign‑exchange intervention: selling dollar reserves to support local currencies.
• Reserve drawdowns: using accumulated foreign‑exchange reserves to stabilize markets.
• Import restrictions or taxes: reducing demand for dollars by discouraging non‑essential imports.
• Liquidity measures and swaps: providing dollar liquidity to financial institutions.

These measures can reduce short‑term volatility, but they rarely reverse a currency trend driven by global forces.

The Bigger Risk for Emerging Markets

If oil prices remain elevated and the dollar stays strong, the pressure could shift from currency markets into broader economic stress. Higher energy costs raise inflation, widen current‑account deficits, and force governments to choose between defending their currencies and conserving reserves for imports or debt payments.

For many emerging economies, the current episode illustrates a familiar vulnerability: when global capital tightens and commodity prices spike at the same time, currencies often become the first pressure point—and policymakers must act quickly to prevent a wider financial shock.