Indian Rupee Declines 37 Paise to 95.32 Against US Dollar

Indian Rupee Weakens Against US Dollar Amid Geopolitical Tensions and Higher Oil Prices

The Indian rupee opened 37 paise weaker at 95.32 against the US dollar on Monday, June 8, as rising geopolitical tensions, higher crude oil prices, and a sharp selloff in global equities weighed on sentiment. Despite recent support from the Reserve Bank of India's measures aimed at boosting capital inflows, the rupee remains vulnerable to movements in oil prices.

Market participants note that the Reserve Bank of India's recent initiatives have improved the near-term outlook for the rupee, with economists estimating that the measures could attract $30-50 billion in capital inflows by March 2027. The steps have helped change the narrative around the rupee, easing concerns over a deeper depreciation.

However, the rupee's appreciation towards the 93-per-dollar level largely depends on crude oil trends. Crude prices surged after Israel launched fresh strikes on Lebanon despite an existing truce, dampening hopes of a broader de-escalation in the Middle East and a potential resumption of shipping through the Strait of Hormuz. The renewed tensions have also complicated prospects of a US-Iran agreement, with Tehran reportedly linking any deal to a ceasefire in Lebanon.

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The rupee also faced pressure from a broader risk-off move across global markets. Asian equities fell sharply as investors retreated from the AI-led technology rally, following a steep decline on Wall Street. The strength of the US labour market has complicated the Federal Reserve's outlook for interest rate cuts.

The US nonfarm payrolls increased by 172,000 in May, significantly exceeding market expectations of 85,000 jobs, while payroll figures for previous months were revised upward by an additional 93,000 jobs. The unemployment rate remained unchanged at 4.3%, underscoring the resilience of the world's largest economy.

Experts note that the stronger-than-expected jobs data leaves Federal Reserve Chair Kevin Warsh with limited scope to consider rate cuts at the upcoming June 16-17 policy meeting. As a result, market participants increasingly expect the Fed to keep interest rates unchanged, while the possibility of higher rates later in the year has gained traction.

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The immediate market reaction was reflected in the US dollar's strength. The dollar index climbed back above 100, supported by robust economic data and ongoing geopolitical uncertainties, which have boosted demand for the greenback as a safe-haven asset.

Amit Pabari, MD of CR Forex Advisors, notes that the RBI has provided meaningful support to the rupee through measures aimed at attracting foreign capital. "While the medium-term outlook remains positive, with USDINR likely to break below 94.50 and gradually move towards the 94.00-93.80 zone, external factors will remain crucial," he said. "Any escalation in US-Iran tensions, leading to a stronger dollar or higher oil prices, could temporarily push the pair back towards the 95.30-95.50 range."