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.

The Indian rupee hovered near 95.5 per dollar, strengthening after the holiday break on reduced pressure from elevated oil prices and easing Middle East tensions. Optimism grew following reports that the United States and Iran were moving toward extending their ceasefire arrangement for 60 days while continuing negotiations over Tehran’s nuclear program. Crude prices declined on expectations that disruptions to energy flows through the Strait of Hormuz could ease if diplomatic talks progress further. Brent crude fell toward $92 per barrel and remained on track for its steepest monthly decline since 2020, offering some relief to oil-importing economies. Meanwhile, traders also pointed to likely dollar outflows linked to global equity index rebalancing as a near-term source of volatility for the Indian currency. The rupee has weakened roughly 5% since the conflict involving Iran escalated earlier this year and remained on track for a monthly decline.

The Indian rupee hovered near 95.7 per dollar, easing after reaching its strongest level in nearly two weeks, as renewed geopolitical tensions and stronger importer demand for dollars pressured the currency. Fresh US military strikes in southern Iran weakened hopes for a near-term Middle East peace deal, while Brent crude prices rebounded more than 2% to above $98 per barrel. The rupee had earlier recovered from record lows of 96.96, supported by improved sentiment and dollar-selling intervention by the RBI. Still, traders expect the rebound to face headwinds from month-end importer demand and maturing offshore non-deliverable forward positions. Meanwhile, concerns over imported inflation intensified after India raised compressed natural gas prices following another fuel price hike this month. Goldman Sachs also raised its inflation forecast and now expects two more RBI rate hikes this year. The forex market will be closed on Thursday and will continue trading on May 29.