The Indian Rupee weakened to a one-week low of ₹95.7825 per dollar on Wednesday, June 3, 2026, as state-run banks were selling dollars, most likely on behalf of the Reserve Bank of India, helping limit the fall in the currency. According to The Hindu BusinessLine, traders said state-run banks were conducting dollar-rupee buy/sell swaps, in line with recent sessions, with the scale of swaps by the central bank over the last two weeks surprising the market. Far-tenor dollar-rupee forward premiums declined as banks dealt the swaps, with the 1-year implied yield down 5 basis points to 2.99 per cent. As per CR Forex managing director Amit Pabari, "In many ways, the RBI has become the steady hand shielding the currency from external shocks."
The Indian Rupee (INR) was last trading at ₹95.7825 on Wednesday, June 3, 2026, after hitting a record low of almost ₹97 to the dollar on May 20. According to The Economic Times, BofA Securities executive David Hauner warns the rupee could weaken to a record low of ₹98 against the U.S. dollar by July due to the Middle East energy shock. The currency, which has been Asia's worst performing currency this year, faces mounting pressure from the war-led energy crisis that threatens to slow growth and push up inflation in India. India imports almost 90% of its crude requirements and half of its gas needs, making it particularly vulnerable to Middle East supply disruptions. The latest decline follows the US Trade Representative's proposal of 12.5% additional duties on India and 53 other countries over forced labour import violations, with the rupee depreciating 28 paise to ₹95.64 in early trade on Wednesday.
Brent crude rose more than 1 per cent after hostilities in the Gulf flared anew, with the U.S. military saying Iranian missile attacks on Bahrain, Kuwait and other regional targets were either thwarted or failed. As per The Hindu BusinessLine, the rupee fell about 0.5 per cent to 95.7825 per dollar, tracking declines in oil-sensitive regional peers like the Indonesian rupiah, which fell to a record low, and the Philippine peso. The outbreak of the Iran–US conflict and consequent surge in crude oil prices strongly affected the Indian currency in the second half of FY26. These factors, combined with trade-related uncertainties and persistent FII outflows in the equity segment, created additional pressure on the rupee's value throughout the year.
The focus now is squarely on the RBI's policy decision on Friday, with a majority of economists polled by Reuters expecting it to keep rates unchanged, but a section of the market expects measures to support the rupee. According to HSBC, "We believe an FX package and rate hikes are coming, but the precise timing remains uncertain." HSBC says the policy is "a close call" but expects a hold on Friday as inflation remains below target. David Hauner from BofA Securities does not see an immediate need for a hike, but expects 25 basis-point increases each in October and December. He does not expect the Federal Reserve to raise rates this year, stating that "it is a more difficult situation, because globally, you are going to tighten financial conditions and again that is not an ideal situation for emerging markets, especially India."
Despite the rupee's weakness, Indian shares continued to stay strained in early trades with BSE Sensex tanking 699.74 points to 73,959.48 and NSE Nifty 50 dropping 177.40 points to 23,302.50 in early trade on Wednesday, June 3, 2026. This negative equity market performance came as oil prices stay elevated, driving fears of inflationary pressures in future. The divergence between India and several Asian economies shows how currency movement depends not only on growth, but also on trade balances, capital flows and world's financial conditions. India has denied the allegations under the forced labour clause and asked the US to end the investigations, saying such matters should be addressed within the framework of ongoing bilateral trade negotiations, as reported by The Hindu BusinessLine. Market participants are now turning their attention to the RBI MPC rate decision on June 5, as inflation, growth and the rupee are under focus.
