The rupee opened marginally higher by 1 paise at 95.70 against the US dollar on Thursday, showing some resilience after recent weakness. As reported by CNBC TV18, the rupee opened slightly higher compared with its previous close of 95.71, even as persistent foreign fund outflows, elevated crude oil prices and geopolitical tensions in the West Asia kept pressure on the currency. The currency had weakened for a second consecutive session, falling 40 paise to close at 95.70 against the US dollar on Wednesday, amid escalating Gulf region tensions and rising crude oil prices. The currency traded between 95.80 and 95.44 on Tuesday, opening weaker due to high oil prices but appreciating during the day partly because of RBI intervention. Brent crude was $1.17 lower at $96.64 per barrel early Thursday in Asia, while benchmark US crude oil shed $1.08 to $94.94 per barrel, after oil prices had climbed a day earlier as both the United States and Iran said they launched retaliations for earlier attacks or attempted ones. Forex traders said investor sentiment came under pressure after the Office of the United States Trade Representative (USTR) proposed additional duties on imports from several countries, including India, while fresh tensions in Middle East pushed oil prices higher.
Foreign portfolio investor selling has intensified significantly, with foreign portfolio investors selling nearly $600 million worth of Indian equities on Wednesday, according to preliminary data reported by CNBC TV18. This represents a substantial escalation from previous levels, with foreign portfolio investors having reportedly withdrawn around USD 23 billion from Indian financial markets since the start of the conflict. The pace of June outflows has already nearly matched May's total, weighing on the domestic currency. Market participants said concerns over a prolonged conflict in the West Asia and its impact on oil prices remain a key risk for India, a major crude importer. Most Asian currencies weakened and regional equities declined amid renewed uncertainty surrounding the region. India's Balance of Payments position has come under pressure because of rising import costs, slowing exports, subdued foreign direct investment and concerns over remittance flows from West Asia.
The US Trade Representative has proposed 12.5 per cent additional duties on 54 countries, including India, for failing to prohibit the import of goods produced with forced labour. As reported by PTI, the Office of the United States Trade Representative (USTR) launched two separate Section 301 investigations on March 11 and 12, 2026, covering 60 economies over concerns related to forced labour and excess industrial capacity. The country is also "parallelly" engaged with the US for finalisation of an interim trade agreement, a framework for which was announced through a joint statement on February 7. The government said India is engaged with the US on the Section 301 investigations over concerns related to forced labour and excess industrial capacity. This trade action adds another layer of pressure on the rupee alongside existing geopolitical tensions and capital outflows.
Escalating tensions in the Gulf region have significantly intensified rupee weakness, with Iranian missiles targeting Kuwait and Bahrain indicating the fragility of the truce in the region. As reported by The Economic Times, the fusillade of Iranian missiles targeted Kuwait and Bahrain, indicating the fragility of the truce in Gulf region and pushing currency bears to buy into the greenback's promise of safety. The currency has weakened 0.9% in FY27 so far and declined nearly 11% in FY26, highlighting the sustained pressure from multiple fronts including geopolitical uncertainties, oil price volatility, and persistent foreign fund outflows. Ritesh Bhansali, deputy CEO at Mecklai Financial Services, noted that the currency opened weaker because of high oil prices and was able to appreciate during the day partly because of RBI intervention, and the news that government is finalising measures to attract foreign capital into the country.
Jateen Trivedi, Vice President Research Analyst – Commodity and Currency at LKP Securities, said that higher crude prices have capped the rupee's recent recovery and kept market sentiment cautious ahead of the Reserve Bank of India's monetary policy decision on June 5. As reported by CNBC TV18, he expects the rupee to trade in the 95.25-96.25 range in the near term. A recent Piramal Finance report cautioned that a combination of rising crude oil prices and a weakening rupee could revive inflationary pressures and external sector risks if sustained over a prolonged period. Prime Minister Narendra Modi has urged citizens to adopt austerity measures, including reducing fuel consumption, postponing foreign travel and avoiding gold purchases for a year to conserve foreign exchange reserves. The dollar index, which measures the greenback's strength against a basket of six currencies, was trading 0.13% higher at 99.34, with the benchmark 10-year US Treasury yield at 4.46%.
Market focus is shifting to the Reserve Bank of India's monetary policy decision due on Friday, with traders expecting the central bank to continue intervening in the foreign exchange market to curb excessive volatility. As reported by The Hindu, while most economists expect the central bank to keep interest rates unchanged, rising crude oil prices and geopolitical uncertainties have increased attention on the RBI's inflation outlook and policy guidance. Analysts said the central bank's commentary on the future path of interest rates will be closely watched, especially amid concerns that higher energy costs could add to inflationary pressures. Despite the recent weakness, traders noted that the rupee has avoided a sharper depreciation due to interventions by the Reserve Bank of India (RBI) in the foreign exchange market, even as crude prices remain elevated and portfolio outflows persist. Meanwhile, Asian shares retreated on Thursday following declines on Wall Street that snapped a nine-day winning streak for the S&P 500.
