Why the Indian Rupee and Korean Won Are Crashing: 4 Factors Driving Asia's Currency Crisis

The Indian rupee and South Korean won are experiencing their sharpest weakening in decades. On June 23, 2026, the rupee settled at 94.74 per US dollar, while the won breached 1,560 per USD in early June — its weakest level since the 1997–98 Asian financial crisis. Here are the four factors driving Asia's currency crisis.

Factor 1: A Surging US Dollar

The US Dollar Index (DXY) climbed to 101.42 on June 23, 2026, a 13-month high . The dollar strengthened 2.19% over the prior month and 3.63% over the last 12 months . Safe-haven demand amid equity market turbulence and expectations of a hawkish Federal Reserve — including a potential rate hike in September — have pushed the dollar higher .

Factor 2: Record Foreign Portfolio Outflows from India

Foreign investors pulled over $20 billion from Indian equities in the first four months of 2026, surpassing the full-year 2025 record of $18.9 billion . The outflow was driven by the Iran conflict, rising US bond yields, a weak rupee, and limited AI investment opportunities in India . The bulk of the selling — $19 billion — occurred after the Iran war started . Financial stocks bore the brunt, with ₹79,981 crore in outflows .

Factor 3: South Korea's Won Falls to 17-Year Lows

The won crossed 1,500 per USD in mid-May and stayed above that level for 14 consecutive trading days by June 5 — the longest such stretch since the 2009 global financial crisis . It later breached 1,560 per USD on June 6, its weakest level in 17 years . The Bank of Korea reported that the weekly average won-dollar closing price in June exceeded 1,520, the highest since the 1997–98 Asian financial crisis . Deputy Prime Minister and Finance Minister Koo Yun-cheol stated on June 7 that "excessive expansion of exchange-rate volatility is not desirable for the Korean economy" and warned authorities "will not tolerate excessive volatility and one-way herd behavior" . The won's slide was directly attributed to sustained foreign selling in Korean stock and bond markets .

Factor 4: Oil Dependence and Trade Deficits Widen the Damage

India imports roughly 85% of its crude oil . When oil spiked above $110 per barrel earlier in 2026 amid the Iran conflict, it sharply increased dollar demand and worsened the current account deficit . The Economic Survey highlighted the deficit in goods trade and dependence on foreign portfolio investors as structural factors making the rupee susceptible to external shocks .

RBI and Korean Authorities Step In

The Reserve Bank of India announced measures on June 5 — including subsidized FX hedging for FCNR(B) deposits and concessional swap facilities for state-owned enterprises — to stem the rupee's decline . The Indian government also removed taxes on capital gains and interest on government securities for foreign investors . South Korean authorities convened joint inspection meetings and warned against excessive volatility .

The Big Picture: A Synchronous EM Asia Exodus

The simultaneous weakening of the rupee and won — along with pressure on other Asian currencies — reflects a synchronous capital exodus from EM Asia as global risk appetite deteriorates and the dollar strengthens . The combination of a hawkish Fed, geopolitical shock from the Iran conflict, and structural vulnerabilities in oil-importing economies has created a perfect storm for Asia's emerging-market currencies. As one analyst put it, the rupee's record low has been "primarily driven by external factors, not domestic economic weakness" .