The jumped
sharply on Friday to log its best single-day gain in nearly two
months as likely intervention by the central bank converged with
a drop in oil prices, which also briefly lifted the local
currency above the 95/USD mark.
The rupee ended the session at 95 per dollar, up
0.7 per cent from the previous session, its best day since April 2. It
gained by a similar amount week-on-week, but was flat for the
month.
While the rupee appeared set to endure a weaker day, likely
dollar selling intervention reversed the trajectory, with a drop
in crude prices adding to the upward momentum.
Oil prices dropped after a plan for extending the truce
between the U.S. and Iran awaited approval from U.S. President
Donald Trump. Brent futures were last hovering around $91 per
barrel, on track for their steepest weekly decline since early
April.
According to four sources familiar with the matter, the
agreement would extend the truce for another 60 days and allow
traffic to flow through the Strait of Hormuz, a key artery for
global energy supplies.
Worries over the economic hit to India – the world’s
third-largest oil importer – have spurred steep capital
outflows, with overseas investors pulling over $24 billion from
Indian debt and equities on a net basis between March and May.
Investors’ focus is now on the Reserve Bank of India’s
monetary policy decision on June 5. Most economists polled by
Reuters expect the RBI to keep its key interest rate unchanged
at 5.25 per cent.
A minority are anticipating a rate increase to counter
inflationary risks and steady the currency, which is down more
than 5% so far in 2026.
“Our base case is that the RBI lifts the repo rate to 6.00 per cent
before the end of the year, but that is contingent on the crisis
coming to an end soon and energy prices dropping back,” Shilan
Shah, deputy chief EM markets economist at Capital Economics,
said in a note.