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Indian Rupee starts flat, higher oil prices keep outlook uncertain

  • The Indian Rupee opens flat at around 95.72 against the US Dollar with investors await the RBI’s monetary policy.
  • US President Trump said that Iran has agreed to give up its nuclear ambitions.
  • Indian government approves scrapping capital gains tax on foreign investment in government bonds.

The Indian Rupee (INR) opens flat against the US Dollar (USD) on Thursday after a strong Wednesday. The USD/INR pair holds onto previous day’s gains around 95.72 as oil prices remain higher, with United States (US)-Iran negotiations remaining in deadlock.

In the opening trade, MCX Crude Oil price opens 1.2% lower to near 9,120, but is close to its 10-day high of 9,290 posted on Wednesday.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.

US President Trump remains confident of early deal with Iran

US President Donald Trump said in The New York Post’s “Pod Force One” program on Wednesday that Iran has agreed over not having nuclear weapons, adding, “Iran’s Ayatollah [referring Supreme Leader Mojtaba Khamenei] is involved in negotiations with Washington” and he will meet him at some time. However, Trump warned that Iran could change its mind and can pursue its nuclear ambitions.

When asked about the timeframe in which the US and Iran could reach a deal, Trump said a memorandum of understanding (MoU) between the nations could reopen the Strait of Hormuz as early as this week; however, there is a possibility that the US blockade on Iranian sea ports could last till Labor Day, September 7.

India approves scrapping capital gains tax on foreign investment in government bonds

Earlier in the day, the Cabinet meeting has approved the scrapping of capital gains tax on foreign portfolio investment in government bonds, aiming to improve the condition of foreign flows in the Indian economy.

The move was highly anticipated by the Indian government as significant Foreign Institutional Investors (FIIs) selling in the Indian stock market has been one of key reasons behind Indian Rupee’s sharp depreciation.

On Monday, FIIs also remained net sellers in the Indian equity markets, offloading their stake worth Rs. 5,616.56 crore. So far in June, overseas investors have remains net sellers in all three trading days.

RBI’s policy comes into limelight

Going forward, the major trigger for the Indian Rupee will be the Reserve Bank of India’s (RBI) monetary policy, which will be announced on Friday. The RBI is expected to hold the Repo Rate steady at 5.25% and guide a hawkish monetary policy outlook, as higher energy prices have de-anchored inflation expectations.

In the US, investors will pay close attention to the Nonfarm Payrolls (NFP) data for May, which will be released on Friday. The impact of the US NFP data will be significant on the Federal Reserve’s (Fed) monetary policy outlook.

Technical Analysis: USD/INR holds above 20-day EMA

USD/INR trades aLmost flat at around 95.72 in the opening trade. The pair maintain a modest bullish bias as it stays above the 20-day Exponential Moving Average (EMA) at 95.47. The price action consolidates near recent highs while the Relative Strength Index (RSI) at about 54.8 sits slightly above the neutral territory, suggesting steady but not overextended upward momentum.

On the downside, immediate support is aligned with the 20-day EMA around 95.47, which reinforces the underlying demand zone and would need to give way to signal a deeper corrective phase towards the June 2 low at 95.00, followed by the May 7 low at around 94.00. Looking up, the pair could reclaim the all-time high of 97.09 if it manages to rise above the May 28 high at 96.65.

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Indian Rupee extends gains at the start of RBI policy week

  • The Indian Rupee rises at open against the US Dollar at the start of the RBI policy and the US NFP week.
  • Oil prices rebound due to the exchange of attacks between Israel and Lebanon.
  • The RBI is expected to leave interest rates unchanged on Friday.

The Indian Rupee (INR) opens on a positive note against the US Dollar (USD) at the start of the Reserve Bank of India (RBI) policy week. The USD/INR pair slides to near 94.78 as the Indian currency strengthens further amid solid hopes over the United States (US)-Iran permanent peace deal, even as oil prices have bounced back.

At press time, the WTI Oil price trades 2% higher to near $89.00 after registering over-a-month low at $85.41 on Friday. Theoretically, currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform when oil prices recover.

Oil prices have regained ground, following attacks from Israeli Defense Forces (IDF) in Lebanon on Iran-backed Hezbollah, which renewed fears of an energy supply crisis.

US President Trump revises terms for Iran deal

The comments from US and Iranian officials clearly state that negotiations toward a permanent peace deal are ongoing, and Washington doesn’t want Tehran to have nuclear weapons in any way.

US President Donald Trump said in an interview with Fox News over the weekend that Washington wants to make sure Iran neither develops nuclear weapons nor purchases them before reaching a deal, adding that he has inculcated tougher terms for Iran relating to nukes and the Strait of Hormuz. “So now [the agreement] says, ‘We will not develop or in any way purchase a military weapon,” Trump said.

After US President Trump’s interview, Iran’s Foreign Minister Abbas Araghchi said that negotiations with Washington were ongoing, and any deal could not be judged before a definitive outcome is reached, Reuters reported.

RBI policy and India’s Q1 GDP data awaited

This week, key triggers for the Indian currency will be the RBI’s monetary policy announcement and the Q1 GDP data, which will be released on Friday. According to the latest Reuters poll, the RBI will hold its key Repo Rate unchanged at 5.25% and deliver a hawkish stance on the monetary policy outlook, as high oil prices due to the energy supply crisis have prompted inflationary pressures globally.

The poll also showed that a majority of economists anticipated at least one interest rate hike by the year-end.

Over the weekend, India’s Finance Ministry warned that a depreciating Indian Rupee, higher energy prices, and below-average expected monsoon pose a threat to nation’s inflation outlook.

US NFP will be key trigger for US Dollar

The US Dollar starts the week with a mild bullish tone, with investors awaiting key US labor market and economic activity data releases, especially the Nonfarm Payroll (NFP) data, which will be released on Friday.

The impact of the US NFP data is expected to be limited on the Federal Reserve’s (Fed) monetary policy outlook, unless there is a dramatic change, as the latest comments from policymakers have shown that they are more concerned about high inflation than weak job demand.

Technical Analysis: USD/INR settles below 20-day EMA

USD/INR trades lower at around 94.78, holding below the 20-day exponential moving average (EMA) at 95.3677 and keeping a mild bearish near-term bias.

The pair has slipped away from recent highs, and with price capped beneath this short-term EMA, rallies appear vulnerable to selling while the Relative Strength Index (RSI) at 45.7 drifts below the neutral 50 line, hinting at waning upside momentum rather than outright oversold conditions.

On the topside, initial resistance is defined by the 20-day EMA at 95.37, and a sustained break above this barrier would be needed to ease immediate downside pressure and open the way toward 96.00. Looking down, the pair could extend its decline towards May 7 low at around 94.00

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Indian Rupee Rises to 3-Week High

The Indian rupee strengthened to around 94.7 per dollar, reaching three-week highs as sustained intervention by the Reserve Bank of India boosted confidence in the currency. Expectations that the central bank will continue to curb excessive exchange-rate volatility ahead of its upcoming policy decision also supported sentiment. Markets are now focused on the RBI’s policy meeting, where the benchmark repo rate is widely expected to remain unchanged at 5.25%. Investors will closely watch the central bank’s updated inflation and growth forecasts, as well as any signals on measures to attract foreign capital and support external financing conditions. However, the rupee’s gains were limited by renewed geopolitical tensions in the Middle East, which pushed Brent crude above $93 per barrel. Meanwhile, uncertainty surrounding US-Iran negotiations and continued foreign portfolio outflows from Indian equities capped further appreciation.

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Indian Rupee ticks higher as oil prices decline while Iran uncertainty persists

  • The Indian Rupee ticks higher against the US Dollar as oil prices decline.
  • Iran alleges that the US is violating the ceasefire.
  • FIIs turned out to be net sellers on Tuesday, offloading the stake worth Rs. 2,407.87 crore.

The Indian Rupee (INR) trades marginally higher against the US Dollar (USD) in the opening session on Wednesday. The USD/INR pair ticks lower to near 95.70 as oil prices fail to hold their Tuesday’s recovery move, with market participants remaining confident that the United States (US) and Iran are close to reaching a deal.

At press time, the WTI Oil price trades 1.8% lower to near $90.80. Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, attract bids following a sharp correction in oil prices.

US-Iran negotiations continue despite US defensive attacks on Iran

On Tuesday, Iran’s Islamic Revolutionary Guard Corps (IRGC) threatened retaliation after the US carried out strikes on southern Iran, which were described as “self-defense” by the US Central Command. The Iranian Foreign Ministry condemned the US attacks, calling them a “gross violation” of the ceasefire.

However, negotiations between the US and Iran regarding an end to the Middle East war and the reopening of the Strait of Hormuz, a vital passage to almost 20% of global energy supply, continue through mediators.

An Iranian official said on Tuesday that the unfreezing of Iran’s funds is the last serious sticking point with the United States (US) being resolved through Qatar mediation, Fars agency reported. However, there had been no official confirmation.

Earlier this week, US Secretary of State Marco Rubio said that the Strait of Hormuz has to be open “one way or the other,” and finalizing the deal with Iran may take a few days.

FIIs remained net sellers on Tuesday

There seems to be a mixed sentiment of Foreign Institutional Investors (FIIs) toward the Indian stock market the entire month. Overseas investors have been seen turning out net sellers on alternative days, with no clear pattern. On Tuesday, FIIs offloaded their stake worth Rs. 2,407.87 crore after increasing by Rs. 821.75 crore on Monday.

US Dollar wobbles ahead of US PCE Inflation data

The US Dollar trades in a tight range around 99.00 as investors await clear signals from the US and Iran regarding the progress in negotiations toward a permanent deal.

On the domestic front, investors await the US Personal Consumption Expenditure Price Index (PCE) data for April, which will be released on Thursday. Investors will pay close attention to the US PCE inflation data to get fresh cues on the Federal Reserve’s (Fed) monetary policy outlook.

The US core PCE inflation – which is the Fed’s preferred inflation gauge – is estimated to have grown at an annualized pace of 3.3%, faster than 3.2% in March, with monthly figures growing steadily by 0.3%.

Technical Analysis: USD/INR attracts bids near 20-day EMA

USD/INR trades slightly lower at around 95.70 as of writing. The pair holds a constructive bullish bias as spot remains above the 20-period Exponential Moving Average (EMA) at 95.4387.

The EMA’s upward slope hints that the recent advance is still supported, while the Relative Strength Index (RSI) near 56 suggests positive but not overbought momentum, allowing room for further gains if buyers stay in control.

On the downside, initial support is located at the 20-day EMA around 95.44, where a break would signal fading short-term momentum and expose a deeper corrective move towards 95.00. Looking up, the pair would attempt to return to the all-time high around 97.00 if it manages to recover above the May 22 high at 96.37.

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Indian Rupee: Gradual stabilisation prospects after oil shock – ING

ING’s Deepali Bhargava argues that India’s fuel subsidies and diversified energy sourcing have contained the inflation and growth impact of higher oil prices, but shifted pressure onto the Indian Rupee (INR). She sees weak capital inflows as the key drag, while improved Real Effective Exchange Rate (REER) metrics and Reserve Bank of India (RBI) reserves should help USD/INR stabilise later in 2026.

Rupee strain as flows stay weak

“India’s fuel subsidies are cushioning inflation for now, and diversified energy sourcing has eased supply pressures. But the strain has shifted to the rupee. Its recent slide reflects deeper structural weaknesses, especially chronically soft capital inflows. Unless those inflows recover, the rupee’s vulnerability is likely to persist”

“The biggest impact of higher global oil prices has been on the currency. This shift is less about an exceptionally large current account deficit and more about flows. While India’s external position is softening, it is far from crisis territory. We expect the current account deficit to widen to around 2.1% of GDP in 2026, up from around 0.5% in 2025, largely due to higher oil prices. Even with Brent averaging $104/bbl in 3Q, our CAD [Current Account Deficit] forecast of around 2% of GDP remains well below levels seen during past stress episodes such as the taper tantrum in 2013, where the current account deficit averaged over 4% of GDP. Yet, the extent of INR depreciation has been unusually large, reflecting weak capital inflows rather than current account imbalances.”

“Since then, however, the adjustment has been swift. The CPI inflation rate has nearly halved to an average 2.5%. The REER has declined by over 12%, bringing it back to levels last seen around 2014. On a broader valuation lens, the INR now sits near the bottom of its six-year REER range, indicating that much of the earlier overvaluation has been unwound.”

“Overall, while near-term pressures persist, the adjustment is already well underway. We expect USD/INR to end the year at 95.50, with risks skewed more towards gradual stabilisation than a disorderly weakening.”

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Indian Rupee Rises to 2-Week High

The Indian rupee strengthened to around 95.4 per dollar, extending its rally for another session to a two-week high as sentiment improved on easing crude oil prices and supportive remarks from the Reserve Bank of India. Support for the rupee increased after Brent crude prices fell below $100 per barrel for the first time in over two weeks amid optimism that the US and Iran are moving closer to a peace agreement. Sentiment was further boosted after Sanjay Malhotra stated that the RBI would do “whatever is required” to ensure orderly forex market movements, adding that the rupee appears undervalued. He also said the central bank has around $700 billion in reserves to curb volatility. However, gains in the rupee were partly limited by persistent inflation concerns after India’s state-owned fuel retailers raised petrol and diesel prices for the fourth time in May to offset losses stemming from higher costs linked to the Iran conflict.

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RBI’s Malhotra: Indian Rupee may be undervalued

Reserve Bank of India (RBI) Governor Sanjay Malhotra said that the Indian Rupee (INR) may now be undervalued following its recent depreciation, Reuters reported on Monday.

Malhotra further stated that the Indian central bank does not target any specific level for the currency, emphasizing that the RBI stands ready to intervene if speculative pressures build up.

RBI Governor said the central bank has enough tools in its kit, including nearly $700 billion in reserves to quell any undue speculative movement. He added that the RBI’s primary mandate is to target inflation. “If the evolving inflation trajectory provides policy space, we support growth,” said Malhotra.

Market reaction 

At the time of writing, the US Dollar Index (DXY) is trading 0.21% lower on the day at 95.45.

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Rupee Finds Relief as Oil Prices Ease

The Indian rupee hovered near 96.4 per dollar, pausing losses after briefly crossing the 97-per-dollar mark for the first time. Softer oil prices offered temporary relief as Brent crude fell more than 5% to near $105 per barrel, while the US 10-year Treasury yield slipped below 4.60%, improving market sentiment. The rupee had remained under pressure, falling nearly 2.5% over nine sessions amid strong dollar demand, rising US yields, and heavy foreign fund outflows. Meanwhile, the central bank has already announced a $5 billion dollar-rupee swap auction scheduled for May 26. The Reserve Bank of India is also reportedly considering measures to stabilize the rupee, including a possible rate hike, additional swap auctions, and schemes to attract foreign currency inflows from non-resident Indians, which officials estimate could bring in up to $50 billion. Markets are now focused on the RBI’s June 3–5 policy meeting for signals on further support measures.