Indian Rupee Opens at 94.97 Against US Dollar, Registers 3-Paise Gain

Indian Rupee Opens Marginally Higher Amid Rising Crude Oil Prices

The Indian rupee opened marginally higher by 3 paise at 94.97 against the US dollar on Monday, 1 June, despite concerns over continued foreign portfolio outflows and rising crude oil prices. The surge in crude prices, which climbed after hopes of a breakthrough in US-Iran peace negotiations faded, put pressure on most Asian currencies.

Brent Crude Advances to $93.4 per Barrel

Oil prices surged, with Brent crude advancing more than 2.5% to $93.4 per barrel, as Israel intensified military operations in Lebanon, reducing expectations that Washington and Tehran would soon agree to extend their ceasefire arrangement. The South Korean won emerged as the biggest loser, declining 0.9% in response to the rise in crude prices.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

RBI Continues to Manage Volatility

India's foreign exchange reserves fell to $681.4 billion for the week ended 22 May from $688.9 billion a week earlier, primarily due to valuation losses in gold holdings and foreign currency assets. However, the data suggests that the Reserve Bank of India (RBI) remains active in managing excessive currency volatility.

Focus Shifts to RBI Policy Meeting

The RBI's monetary policy meeting, scheduled for June 3–5, presents a delicate balancing act for the central bank. While consumer inflation remains below the RBI's 4% target, rising fuel prices and a sharp increase in wholesale inflation have raised concerns about future price pressures.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Rate Hike Expectations Increase

Experts believe that the combination of inflation risks, currency sensitivity, and the need to attract foreign capital through debt inflows has strengthened the case for a more cautious RBI stance. As a result, the probability of a rate hike appears higher than it was a few months ago.

Rupee Outlook

According to Amit Pabari, Managing Director of CR Forex Advisors, the 95.50–95.75 zone remains a crucial technical resistance area for the USD/INR pair. He noted that as long as crude oil prices remain contained and global risk sentiment continues to improve, the Indian rupee is likely to maintain its positive bias, potentially strengthening towards the 94.00–94.50 range in the near term.