MUMBAI, – The Indian rupee is poised to weaken at Monday’s open, with the selloff in Asian equities and fading hopes of a US-Iran peace deal undermining the central bank-supported rally.
The rupee is expected to open in the 95.20 to 95.30 range to the US dollar, per traders, after climbing 0.88 per cent on Friday to 94.9450. The move marked the currency’s biggest single-day advance in two months, driven by a series of steps by the Reserve Bank of India to boost dollar inflows.
Economists expect the RBI’s measures to draw $30-$50 billion in capital inflows through March 2027.
The steps by the RBI, which were overdue, have changed the narrative for the rupee, with the near-term outlook “no longer looking dire”, a currency trader at a bank said.
Whether there is room for a further rally to 93 levels is “simply” down to oil prices, which are “back on the up move today”, he added.
Oil prices climbed after Israel carried out renewed strikes on Lebanon despite a truce, undermining hopes for a broader de-escalation and the restart of shipping through the Strait of Hormuz. The escalation adds to obstacles facing a US-Iran deal, with Tehran linking any pact to a Lebanon ceasefire.
Brent crude rallied 3.5 per cent to $96.36 a barrel.
In addition to headwinds from higher oil prices, the rupee will have to contend with a selloff in US equities that spilled over into Asian markets.
Asian equities tumbled amid investors pulling back from the AI-driven rally. South Korea’s equity index slumped nearly 7 per cent, following an over 4 per cent drop in the Nasdaq on Friday.
Risk appetite was further undermined by a jump in US Treasury yields after data showed stronger-than-expected job growth in May, cementing expectations that the Federal Reserve may raise interest rates later this year.
