Indian Rupee Halts Gains as Oil Rises

The Indian rupee hovered around 94.3 per dollar, halting gains as higher crude oil prices, fueled by renewed US-Iran tensions, tempered demand for the currency. Brent crude rose a modest 0.6% to $72.44 per barrel after the latest exchange of strikes between the US and Iran highlighted lingering risks surrounding shipping through the Strait of Hormuz. However, gains in oil prices were capped by reports that Washington and Tehran had agreed to suspend further attacks ahead of a potential meeting in Qatar on Tuesday, helping ease concerns over an immediate supply shock. Market participants are also awaiting a slate of domestic economic data, including India's May industrial output on Monday, the Manufacturing PMI on Wednesday, and the Services PMI on Friday, for further insights into domestic economic activity. In addition, attention will be on the US June nonfarm payrolls report due on Thursday, a key release that could shape expectations for Federal Reserve policy.

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. Crude oil 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 market will be closed on June 26 and will resume trading on Monday, June 29.

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.