The Indian rupee opened slightly weaker at 94.36 against the US dollar on Monday (June 22), compared with Friday's close of 94.32, as global markets tracked softer crude oil prices and easing geopolitical concerns in the West Asia. According to CNBC TV18, the rupee's opening weakness comes despite Iran's foreign ministry saying talks held in Switzerland with US Vice President JD Vance had shown 'good progress', which had earlier helped ease pressure on emerging market currencies. The currency movement reflects the ongoing volatility in regional markets as investors assess the latest developments in US-Iran relations.
Brent crude futures for August delivery declined 1.7% to $79.24 per barrel after Iran's foreign ministry indicated progress in peace negotiations with the United States. As per CNBC TV18, this decline from previous levels when Brent prices had briefly pushed above the $82 mark following concerns about potential military action, demonstrates the market's response to diplomatic progress. The easing of geopolitical tensions has helped reduce fears of prolonged disruption in oil supply routes, providing some relief to emerging market currencies that had faced sustained depreciation pressure.
The Reserve Bank of India's liquidity management efforts faced a setback as banks showed muted demand at the three-day variable rate repo (VRR) auction held on Friday. According to latest RBI data, the central bank received bids worth ₹16,750 crore from banks against the notified amount of ₹1 trillion, indicating limited demand for short-term funds despite the RBI providing liquidity support. The RBI accepted the entire amount at the auction at a cut-off and weighted average rate of 5.26 per cent. This muted participation comes as systemic liquidity surplus stood at around ₹19,163.11 crore as on June 18, reflecting tighter conditions in the banking system compared to previous levels.
Economists at Citigroup Inc. have withdrawn their call for two interest-rate hikes by India's central bank through March next year, citing reduced inflation risks from the interim US-Iran peace deal. According to reports from Business Standard, the revised outlook comes as the Middle East truce has diminished concerns about higher oil prices fueling inflation. The economists, led by Samiran Chakraborty and Baqar Murtaza Zaidi, noted that if the Middle East truce holds, the Reserve Bank of India will not face one of the two primary economic shocks affecting monetary policy. This revision is particularly significant as the RBI held rates steady at 5.25% earlier this month, with market participants having anticipated a hike by August if not June. The peace deal and reopening of the Strait of Hormuz, a vital energy route, have fundamentally altered the interest rate trajectory for India.
Currency traders said lower oil prices and any further improvement in US-Iran relations could continue to support the rupee in the near term, as reported by CNBC TV18. However, a treasury dealer at a private bank noted that 'underlying sentiment has improved, though the move doesn't point toward a sharp rally.' The dealer indicated that 'levels around 94 to the dollar are possible this week, but gains beyond that may be limited.' Elsewhere in Asia, regional currencies traded mixed while the dollar index remained largely flat below the 101 mark. US Treasury yields edged slightly higher but stayed below recent highs, reflecting the cautious market sentiment amid ongoing geopolitical developments.
