Rupee opens 5 paise higher at 94.35 against US dollar

The Indian rupee opened 5 paise stronger at 94.35 against the US dollar on Monday, 29 June, as renewed hostilities between the US and Iran had a limited impact on oil prices, investor risk appetite and Asian currencies.

The domestic currency traded in a 94.15-94.92 range last week, finding support from lower crude oil prices, although a stronger US dollar and subdued global risk sentiment capped gains.

According to a currency trader at a bank, last week's price action reinforced the view that the 94-95 range is likely to remain the rupee's near-term trading band.

Meanwhile, Brent crude rose a modest 0.6% to $72.44 per barrel after fresh retaliatory strikes between the US and Iran highlighted the fragile nature of their temporary understanding and renewed concerns over shipping through the Strait of Hormuz.

A sharp decline in crude oil prices has improved the outlook for the Indian rupee by easing the country's import bill and reducing demand for the US dollar. However, currency experts caution that the relief may prove temporary, with global factors such as US oil purchases and dollar strength likely to keep the rupee's gains in check.

Falling oil prices support the rupee

Brent crude has slipped to around $72 per barrel, its lowest level in four months, after declining more than 10% over the past week. The fall follows the resumption of normal tanker movement through the Strait of Hormuz and the improvement in oil supplies from the Gulf.

According to market experts, lower crude prices are positive for India, which imports the bulk of its oil requirements. Softer oil prices help narrow the country's import bill, reduce demand for dollars and generally support the rupee.

US oil reserve refill could put a floor under crude

Despite the recent correction, analysts believe oil prices may not remain subdued for long.

They point out that the US Strategic Petroleum Reserve (SPR) has fallen to 331.2 million barrels, its lowest level since 1983. Once the US begins replenishing its emergency reserves, the resulting demand could support global crude prices and limit further downside.

Such a scenario could reduce one of the key tailwinds currently benefiting the rupee.

Strong US dollar remains the biggest headwind

Experts believe the rupee's immediate challenge remains the strength of the US dollar.

The greenback remains close to a 13-month high after stronger-than-expected US economic data reinforced expectations that the Federal Reserve may not rush to cut interest rates.

The University of Michigan's Consumer Sentiment Index rose to 49.5 in June, up from 44.8 in May, indicating improving consumer confidence and a resilient US economy. A stronger economic backdrop supports higher US interest rates for longer, keeping the dollar firm and limiting gains in emerging market currencies, including the rupee.

India's domestic fundamentals remain supportive

On the domestic front, experts say India's macroeconomic indicators continue to provide support for the currency.

The country's foreign exchange reserves increased to $672.59 billion during the week ended 19 June, reflecting the Reserve Bank of India's continued efforts to rebuild its foreign exchange reserves after months of intervention in the currency market.

Bond inflows signal renewed investor confidence

Analysts also point to a sharp rebound in foreign investment into Indian government bonds as a positive signal for the rupee.

Foreign inflows into Government Securities under the Fully Accessible Route (FAR) climbed to $2.2 billion in June (up to 25 June), marking the highest monthly inflow in 15 months.

The inflows compare with $460 million in May, outflows of $1.25 billion in March, and near-flat inflows of $10 million in April. Of the $3.81 billion in total FAR inflows recorded so far in 2026, nearly 58% has come in June alone, underscoring renewed global investor appetite for Indian debt.

According to market experts, these strong capital inflows, coupled with healthy forex reserves, provide an important buffer for the rupee even as global uncertainties persist.

Rupee Outlook

According to Amit Pabari, MD, CR Forex Advisors, the rupee may remain under pressure amid a firm US dollar and the risk of a rebound in crude oil prices, though bond inflows could offer some support. Technically, 93.50–94.10 is a strong support zone, while a breakout above 94.80 could open the way towards 95.30–95.50.

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