By Jaspreet Kalra
MUMBAI, June 25 (Reuters) – The Indian rupee’s fortunes appear to be turning around as oil prices’ retreat to pre-Iran-war levels and policymakers’ steps help shore up dollar inflows, putting the previously beleaguered South Asian unit among the best regional performers in June.
The rupee rose as much as 0.5% on Thursday to touch 94.16, its strongest level since early May. The currency had tumbled to a record low of 96.96 last month before staging a recovery.
Brent oil prices fell to $72.5 per barrel in Asian trading hours, their lowest since February 27, and are down more than 20% this month. August Brent was trading lower than September, which was priced at $73.59, signalling ample short-term supply as more stranded oil tankers exited the key passageway in Hormuz.
Concurrently, steps taken by the RBI and federal government to shore up dollar inflows have eroded the depreciation bias. Following the measures, government bonds logged their strongest bout of foreign buying since August 2024 while equity outflows moderated.
This has helped the rupee rise about 0.8% this month, trailing behind only the Philippine peso, which was also among the currencies hardest hit by spillovers from the Iran war.
“We expect the USD/INR to remain stable around 95.0 in the near term. On the downside, we think 93.50–94.0 is an important floor to watch. Any downward pressure on the spot rate will likely be offset by the RBI’s FX absorption to fortify its FX reserves,” Dhiraj Nim, an economist at ANZ, said in a note.
India’s foreign exchange reserves have declined to a more than one-year low of $671.6 billion while the central bank’s net outstanding forward dollar sales stood at $95.30 billion as of end-April, compared with $103.06 billion as of end-March.
Elsewhere, investors await the release of U.S. personal consumption expenditure inflation data for cues on the future path of Fed policy rates. Money markets have priced in the near certainty of a rate hike in September.
(Reporting by Jaspreet Kalra; Editing by Sonia Cheema and Janane Venkatraman)
