New Delhi: The Indian rupee opened five paise higher at 94.35 against the US dollar on Monday, supported by easing crude oil prices and strong foreign capital inflows, even as persistent strength in the US dollar and renewed geopolitical tensions in West Asia continued to weigh on market sentiment.
The domestic currency began the week on a firmer note after trading within a 94.15-94.92 range during the previous week. Market participants attributed the rupee’s resilience to a decline in global crude oil prices, which has reduced pressure on India’s import bill and lowered demand for the US dollar. However, analysts cautioned that gains could remain limited due to a robust greenback and lingering uncertainty surrounding global economic conditions.
Brent crude futures rose modestly by 0.6% to $72.44 per barrel after fresh retaliatory strikes between the United States and Iran renewed concerns over regional stability and shipping activity through the strategically important Strait of Hormuz. Despite the latest escalation, oil prices have remained significantly lower than recent highs, providing relief to oil-importing nations such as India.
Brent crude has fallen to around $72 per barrel, marking its lowest level in nearly four months after declining by more than 10% over the past week. The decline followed the restoration of normal tanker movement through the Strait of Hormuz and improved oil supplies from Gulf producers. Economists believe softer crude prices are broadly supportive for the Indian economy, helping narrow the trade deficit and easing pressure on the rupee.
However, experts also warned that this relief may prove temporary. The US Strategic Petroleum Reserve (SPR) currently stands at 331.2 million barrels, its lowest level since 1983. Once the United States begins replenishing these reserves, additional demand could push crude prices higher, reducing one of the major factors currently supporting the Indian currency.
Apart from oil prices, analysts identified the strength of the US dollar as the rupee’s biggest near-term challenge. The dollar has remained close to a 13-month high following stronger-than-expected US economic data, reinforcing expectations that the US Federal Reserve may delay interest rate cuts.
The latest reading of the University of Michigan’s Consumer Sentiment Index rose to 49.5 in June, up from 44.8 in May, reflecting improving consumer confidence and continued resilience in the US economy. Stronger economic indicators typically support higher US interest rates, making dollar-denominated assets more attractive and limiting gains in emerging market currencies, including the rupee.
On the domestic front, India’s macroeconomic fundamentals continue to provide support. The country’s foreign exchange reserves increased to $672.59 billion during the week ended June 19, reflecting the Reserve Bank of India’s efforts to strengthen its reserve position after months of currency market intervention.
Foreign investment into Indian government securities has also witnessed a significant recovery. Investments under the Fully Accessible Route (FAR) reached $2.2 billion in June up to June 25, representing the highest monthly inflow in 15 months. This marks a sharp improvement compared to $460 million in May, following outflows of $1.25 billion in March and nearly flat inflows in April.
Of the $3.81 billion recorded under the FAR route so far in 2026, nearly 58% has been invested during June, highlighting renewed global investor confidence in Indian debt markets. Analysts believe these sustained capital inflows, coupled with healthy foreign exchange reserves, provide an important cushion for the rupee against external shocks.
According to Amit Pabari, Managing Director of CR Forex Advisors, the rupee may continue to face pressure from a firm US dollar and the possibility of a rebound in crude oil prices, although strong bond inflows are expected to offer some support. From a technical perspective, he identified 93.50-94.10 as a key support zone, while a move above 94.80 could pave the way for the rupee to weaken further toward the 95.30-95.50 range against the US dollar.
