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| Photo Credit:
SHASHANK PARADE
The slump in oil prices triggered by the announcement of a U.S.-Iran peace deal is
poised to complement the Indian central bank’s recent efforts to
support the rupee, brightening the currency’s near-term
trajectory.
The rupee strengthened about 0.7% to 94.4625 per dollar on
Monday, its highest level in seven weeks. It was buoyed by a
plunge in crude oil prices after Washington and Tehran indicated
they had reached an initial deal to halt their war and reopen
the Strait of Hormuz.
The currency may be entering a more supportive near-term
phase with lower oil prices reducing pressure on India’s import
bill and current account, while the Reserve Bank of India’s
measures to attract billion of dollars begin to attract inflows,
analysts said.
The rupee was the second-best performing Asian currency on
the day, trailing only the Indonesian rupiah. Its year-to-date
losses have narrowed to 5.6%, with the currency now about 2.5%
above the all-time low of near 97 per dollar hit about a month
back.
RBI’s recent measures have helped address pressures on
India’s balance of payments, with the drop in oil prices further
reinforcing these efforts, said Gaura Sen Gupta, economist at
IDFC First Bank.
Sen Gupta expects the rupee to appreciate to around the
93-94 level by September, aided by a meaningful revival in
inflows related to the central bank’s scheme to draw foreign
currency deposits from non-resident Indians.
Economists have upgraded their outlook for India’s balance
of payments following the RBI’s measures, with most now
expecting a marginal surplus this fiscal year, versus prior
projections of an up to $70 billion deficit.
Until recently, the rupee was widely seen among the most
vulnerable currencies in Asian FX, hit by higher oil prices and
expectations skewed towards more losses.
A handful of market participants believed the RBI might be
forced to hike its policy rate to support the currency, in line
with moves by the Indonesian and Philippine central banks.
WAR CLOUDS FADE
If the Iran peace deal holds and oil prices remain lower, the
rupee is poised to appreciate, said Hemant Mishr, founder and
CIO of Singapore-based S Cube Capital. He expects the currency
to strengthen toward the 92 per dollar level by September,
adding that it remains undervalued.
Since the start of the U.S.-Israeli war with Iran, foreign
investors have withdrawn roughly $30 billion from Indian
equities.
Those portfolio outflows should start to reverse, with
investors growing more confident that the worst of India’s
balance-of-payments and currency pressures have passed, Mishr
said.
The extent of any rupee rally will depend on how far the
central bank allows it to run, economists said, noting that the
RBI may not be keen on excessive appreciation, potentiallyusing
any strength in the currency to pare its sizeable FX forward
book.
Published on June 15, 2026
