Rupee surges 75 paise to close at 86.03 against US dollar as global crude oil prices crash

Rupee Posts Strongest Gain in Months as Oil Prices Plunge

Mumbai, June 24 – In a striking move on Monday, the Indian rupee surged 75 paise to close at 86.03 against the US dollar, buoyed by a sharp decline in global crude oil prices and easing concerns over inflationary pressures. This marks the rupee’s strongest single-day gain in nearly five months, providing a much-needed relief to importers and boosting broader market sentiment.

The rally in the rupee came amid a global market correction in crude oil prices, with Brent crude futures falling below $75 per barrel, down nearly 7% in two sessions. The slide was triggered by concerns about slowing demand from China and the US, along with signs of increased output from non-OPEC countries.

Crude Oil Crash Provides Breathing Room

The Indian economy, which imports more than 85% of its crude oil needs, stands to benefit directly from a fall in oil prices. Lower oil import bills ease pressure on India’s current account deficit and help reduce domestic inflation.

“The rupee’s sharp rebound is primarily due to the dramatic slump in oil prices. A lower oil bill directly translates into lesser dollar outflows, which is supportive for the currency,” said Anindya Banerjee, VP - Currency Derivatives & Interest Rate Derivatives at Kotak Securities.

Traders also pointed to improved risk appetite in the domestic market, with the benchmark BSE Sensex gaining 355 points on the day, closing at 77,895. The inflow of foreign institutional investments (FIIs) added further support.

Dollar Weakens Globally, Aiding INR

The rupee's rally was not in isolation. The US dollar index weakened slightly to 104.35, as markets adjusted to comments from US Federal Reserve officials suggesting a potential rate cut later this year.

“Softening expectations of aggressive Fed tightening and the resulting weakening of the dollar index are providing support to emerging market currencies, including the rupee,” said Divya Devesh, Head of FX Strategy for Asia at Standard Chartered Bank.

Market players expect the US Federal Reserve to maintain a cautious stance in its upcoming July policy meeting amid softening inflation data in the US and mixed signals from the labour market.

FII Inflows Rebound as Risk Sentiment Improves

The Indian equity market saw a modest uptick in foreign fund flows, contributing to the rupee’s strength. FIIs were net buyers to the tune of ₹1,425 crore on Monday, as per provisional exchange data.

“The drop in oil prices and the relative stability of Indian macros are reigniting foreign investor interest. This could pave the way for more INR strength if the trend persists,” noted Nirali Shah, Head of Equity Research at Samco Securities.

RBI Seen Supporting Rupee Stability

While the Reserve Bank of India (RBI) has not made any public comments, traders believe that the central bank may have stepped back from active intervention, allowing the rupee to reflect market fundamentals more freely.

“The RBI has been comfortable with a gradual appreciation of the rupee as long as it doesn’t lead to excessive volatility. Monday’s move likely had minimal resistance from the central bank,” said a senior forex dealer at a private bank, requesting anonymity.

RBI’s foreign exchange reserves rose to $654.5 billion in the week ended June 14, indicating ample firepower to manage any sudden rupee weakness in the future.

Outlook: Can the Rally Sustain?

Analysts caution that while the current momentum favours the rupee, sustained gains will depend on a confluence of global and domestic factors — including US monetary policy, geopolitical tensions, and commodity price movements.

“The rupee could test 85.75 if crude oil continues to slide and FII flows stay positive. However, any sharp dollar recovery or escalation in Middle East tensions could reverse gains,” warned Sugandha Sachdeva, Executive VP & Chief Strategist at Acme Investment Advisors.

On the technical front, the USDINR pair broke a key support level of 86.20, opening the door for a further downmove, analysts at HDFC Securities noted.

Investor Takeaway

For investors, the rupee’s appreciation offers a mixed bag. While importers and companies with foreign currency liabilities gain from a stronger rupee, exporters could feel some margin pressure. The move also tempers inflationary risks, offering a more stable backdrop for bond markets and equity valuations.

Retail investors and NRIs looking to repatriate funds may find this an opportune window to convert USD to INR. Meanwhile, corporate treasury managers will watch the RBI’s next moves closely, especially if the rupee approaches key psychological levels.