The Indian Rupee rose to its highest level in six weeks on Wednesday, aided by Brent crude oil prices falling below $80 per barrel for the first time in over three months.
Continued support also came from recent measures taken by the central bank to strengthen the currency. At the time of writing the Rupee was trading at 94.4350 against the US Dollar, extending its gains to around 1.2% over the previous six trading sessions.
A key challenge for the world’s third-largest oil-importing nation is easing.
Brent crude slipped 0.32% to $78.61 per barrel, its lowest level since early March, shortly after the conflict erupted, and now trades less than 10% above its pre-conflict level.
Oil prices have been trending lower following an interim agreement between the United States and Iran, under which Washington agreed to remove restrictions on Iranian ports while Tehran pledged to resume normal tanker traffic through the Strait of Hormuz.
The Rupee is gaining momentum, supported by optimism surrounding developments in Iran and expectations of foreign currency inflows stemming from the Reserve Bank of India's (RBI) recent measures to support the currency, Reuters reports. Indeed, the Rupee could strengthen further and move toward the 94-per-dollar level in the near term, supported by improving market sentiment and favourable external factors.
Indian policymakers have introduced a series of measures to attract Dollar inflows and bolster the Rupee, which had come under pressure in recent weeks. One such move, eliminating taxes on investments in Indian bonds, is already yielding results.
Foreign investors have invested more than $2 billion in Indian bonds over the past eight trading sessions, exceeding the total inflows recorded earlier this year before the new measures were announced.
Average daily foreign equity outflows have also eased to 22.6 billion Rupees following the announcement, compared with 45.12 billion Rupees during the period from the start of the Iran conflict in late February until 5th June.
Market attention is now shifting to the US Federal Reserve’s policy decision, the first under Chair Kevin Warsh, which is due after Indian trading hours. While no rate change is expected, investors will closely watch the accompanying statement for signals about the policy outlook heading into 2026.