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Informist, Monday, Jun. 1, 2026

 

By Divya Moolayattil

 

MUMBAI – The rupee erased gains and closed steady against the dollar Monday as banks bought dollars on behalf of importers, noting the appreciation of the rupee, dealers said. "There was huge buying (of dollars) in the second half of the trade. FPI outflows continue to annoy rupee," a dealer at a private sector bank said. 

 

The Indian unit hit a high of 94.7300 a dollar during the day but went on to settle at 94.9900 a dollar on Monday, almost flat against 95.0000 a dollar on Friday. The Indian currency settled above the 95-per-dollar level for the first time since May 8. Asian currencies traded on a mixed note against the dollar, with the Thai baht being the worst hit and the Taiwan dollar being the best performer Monday.  

 

A rise in crude oil prices amid rising hostilities in West Asia also put pressure on the Indian unit, dealers said. "The rupee is 100% co-related to oil prices. It's better to follow crude prices than the dollar now," a dealer at another private sector bank said.

 

Iran's Parliament Speaker Mohammad Bagher Ghalibaf Monday said the US had breached its ceasefire agreement with Iran by continuing its blockade of Iranian ports and failing to restrain its ally Israel from escalating attacks in Lebanon. US President Donald Trump is seeking tougher terms and has asked Iran to revise an agreement to end the war, according to media reports. At 1530 IST, Brent crude prices for delivery in August were at $94.00 a barrel, up from $91.2 Friday. 

 

The rupee rose sharply against the dollar, shortly after opening, as the Reserve Bank of India likely intervened by way of dollar sales through state-owned banks, dealers said. The RBI has been intervening in the spot market actively of late to support the rupee, with some dealers saying it sold almost $3 billion in the spot market on Friday.

 

"As soon as the market opened, the PSUs had the floor and moved the rupee by nearly 20 paise. But later, the buying demand came in aggressively, which offset the gains," the dealer said. "The RBI will not come in much if volatility goes away. Until then, it will intervene and curb speculative bets." The Indian unit moved in a range of over 30 paise during the day. 

 

The Indian unit was also supported by foreign inflows linked to the MSCI rebalancing, dealers said. On Friday, global index provider MSCI added shares of Adani Energy Solutions Ltd., Federal Bank Ltd., Indian Bank Ltd., Multi Commodity Exchange Ltd., and National Aluminium Co. Ltd. to its global standard index. It excluded shares of Hyundai Motor India Ltd., Jubilant Foodworks Ltd., Kalyan Jewellers India Ltd. and Rail Vikas Nigam Ltd. from the index. 

 

Sustained foreign portfolio outflows from Indian markets also weighed on the rupee, dealers said. India has seen strong FPI outflows ever since the war in West Asia broke out in late February. So far in May, FPIs have pulled out Indian assets worth $2.38 billion. "FPI outflows compounded with a rise in oil prices have amplified losses in the rupee," a dealer at another private sector bank said. On Monday, the Nifty 50 and Sensex settled 0.7% lower each. 

 

Market participants expect measures from the government or the RBI to arrest the foreign outflows and bring in more funds into India. "FCNR deposits, taxation are all under consideration. Nothing is official yet. No country has imposed taxes on long-term capital gains, if taxes are cut, we can expect an inflow of $20 billion-INR 30 billion, but that will depend on other factors as well," the dealer said. Finance Minister Nirmala Sitharaman last week said the government was willing to listen to concerns raised by investors regarding the tax system, including issues related to long-term capital gains and short-term capital gains.

 

	AT 1530 IST	AT 0900 IST	HIGH	LOW	PREVIOUS(AT 1530 IST)
Spot rupee per $1	94.9900	94.9700	94.7300	95.0375	95.0000
1-year dlr/rupee fwd (paise)	299.68	298.82	309.79	298.18	294.48

 

 

FORWARDS

The one-year dollar-rupee forward premium rose Monday as banks bought forward dollars on behalf of importers, noting a sharp rise in the rupee, dealers said. "There was more buying than selling today," a dealer at a foreign bank said.

 

However, a rise in US Treasury yields limited the gains in forward premiums, according to dealers. At 1530 IST, US Treasury yields were at 4.46%, up from 4.44% Friday and 4.45% Thursday. The premiums rose to a high of 309.79 paise during the day and settled at 299.68 paise Monday.

 

At 1530 IST, the one-year exact period dollar rupee forward premium was 3.16%, up from the previous close of 3.10%. On an absolute basis, the premium was 299.68 paise, against Friday's close of 294.48 paise. 

 

OUTLOOK

On Tuesday, the rupee will take cues from the movement in oil prices and developments in a peace deal between the US and Iran. "Rupee can go either side depending on the war situation, so the rupee range will remain large," a dealer at a private sector bank said.  

 

Market participants will keep a close watch on any announcement by the central bank to boost foreign inflows into India and support the rupee. "Measures are not expected before the MPC, but the RBI or government will announce measures to support the rupee. It is the need of the hour, considering FPI outflows," the dealer said. The RBI's Monetary Policy Committee is set to meet from Jun. 3 to Jun. 5. 

 

Most dealers expect the RBI to continue intervening by selling dollars if the Indian unit comes under pressure. "The range for tomorrow (Tuesday) remains similar, if the geopolitics doesn't blow up," the dealer said. 

 

Dealers now see strong resistance for the Indian currency at 94.70 per dollar. The rupee is likely to move in a range of 94.80-95.30 against the dollar Tuesday.  End

 

US$1 = INR 94.9900

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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