India Rupee Outlook
Seen down on weak risk appetite amid West Asia tensions
This story was originally published at 08:59 IST on 27 May 2026
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MUMBAI – The rupee is expected to remain on a weak footing against the dollar Wednesday and may fall past the psychologically-crucial 96.00-per-dollar mark intraday as risk sentiment among investors soured after an escalation in tensions between the US and Iran.
Iranian officials Wednesday denounced "blatant violations" of the ceasefire by the US, and said there is "zero trust" after the US attacked southern Iran on Monday, according to media reports, which have shaken ongoing diplomatic efforts to end the conflict.
"The key drivers of the rupee are news about the war and the movement of oil prices. Now, the market is cautious as peace deal may be delayed further with new escalations," a dealer at a brokerage firm said.
The rupee is likely to open around 95.80-95.90 a dollar Wednesday, down from 95.6800 a dollar Tuesday. The Indian rupee fell sharply against the dollar Tuesday, snapping its three-day gaining streak. Wednesday, the Indian unit is expected to move in a range of 95.70-96.20 against the dollar, dealers said.
At 0812 IST, Brent crude oil prices for July delivery were $98.53 a barrel, down from over $100 Tuesday, but up from $96.14 Monday. Although crude oil prices fell slightly in early trade Tuesday, dollar demand from importers is likely to weigh on the Indian currency, dealers said. Importers will not buy in panic mode Wednesday, but large demand is expected from companies as well as importers as the end of the month is approaching, the dealer said. Dealers expect the Reserve Bank of India to sell dollars through state-owned banks as the rupee approaches 96.00 to a dollar.
FORWARDS
The one-year dollar-rupee forward premium is expected to rise tracking a fall in US Treasury yields, dealers said. Banks may step in to buy dollars for forward delivery on behalf of importers and companies, fearing further depreciation of the rupee, which will likely take the forward premiums up, they said.
On an annualised basis, the premium on the one-year exact-period dollar-rupee forward contract is seen at 3.32-3.35% Wednesday. Tuesday, it closed at an 11-day low of 3.31%. On an absolute basis, the premium ended at 317.45 paise.
Dollar-rupee | Wednesday 95.80-96.20 | Tuesday 95.3500-95.6900 |
One-month NDF dollar-rupee | Wednesday 96.065 | Tuesday 96.065 |
FPI inflow/(outflow) | $269.33 million May 25 | ($643.70) million May 24 |
End
US$1 = INR 95.6800
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Divya Moolayattil
Edited by Pankaj Aher
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