Indian Rupee Hits Lowest on Record

The Indian rupee strengthened to around 94.3 per dollar,reversing earlier losses and positioning for further gains as crude oil prices fell below levels seen before the Iran conflict. In the previous session, the rupee briefly neared the 95-per-dollar level before rebounding, supported by likely Reserve Bank of India intervention and comments from RBI Governor Sanjay Malhotra that weighed on forward premium levels. Support for the rupee was reinforced by a steep correction in global energy markets following the announcement of a 60-day negotiating period between the United States and Iran. The retreat in energy costs has eased worries about imported inflation for major oil-importing economies such as India. European natural gas prices have fallen about 45% from their wartime peak, while crude oil prices have declined roughly 40%. Brent crude has slipped below $80 per barrel, dropping beneath levels recorded before the Iran conflict escalated, and US crude is approaching the $70 mark.

The Indian rupee fell to around 94.8 per dollar, retreating after a brief stabilization as renewed strength in the greenback and shifting expectations for US monetary policy overshadowed lower crude oil prices. The currency came under renewed pressure after the dollar index climbed to its highest level in more than a year, driven by growing market expectations that the Federal Reserve could implement one or two additional interest-rate hikes before the end of the year. The rupee's decline was partly cushioned by a sharp drop in oil prices, with Brent crude falling below $77 per barrel and posting losses of roughly 16.5% for the month. The decline in energy prices has been supported by signs that tanker movements through the Strait of Hormuz are gradually returning to normal. Additional support came from improving capital-flow dynamics. Foreign investment into Indian debt markets has strengthened, while equity-market outflows have moderated compared with earlier months.

The Indian rupee hovered around 94.6 per dollar, stabilizing after losses in the previous session as falling crude oil prices provided support. Oil markets came under pressure following signs of progress in US-Iran negotiations, easing concerns over global supply disruptions. Additional support came from increased exporter hedging activity in recent sessions. However, the rupee's near-term outlook remains constrained by growing expectations of further monetary tightening by the US Federal Reserve. Market attention has increasingly shifted away from oil price volatility and toward the prospect of higher US interest rates. While Brent crude stayed below $80 per barrel and traded near $78 after tumbling more than 3% on Monday, rising US Treasury yields have emerged as the key concern for currency markets. Futures markets currently assign about a 75% probability to a Fed rate hike by September.