On the domestic front, the RBI announced a series of measures aimed at attracting foreign currency inflows
The rupee remained largely stable over the past week and closed at 95.35 against the dollar on Tuesday, compared with 95.27 a week ago. While the local currency registered a marginal loss during the period, it managed to hold within a narrow range despite a strengthening dollar towards the end of last week.Foreign flows, however, continued to remain weak. According to NSDL data, net FPI outflows stood at about $4.3 billion so far in June, taking the cumulative outflows in 2026 to $27.7 billion.On the domestic front, the RBI announced a series of measures aimed at attracting foreign currency inflows. These include the removal of concentration limits for FPIs in the debt market, expansion of the Fully Accessible Route (FAR) for government securities, extension of the concessional ECB swap window and RBI bearing the hedging cost for select FCNR(B) deposits. The central bank also increased investment limits for NRIs and OCIs and restored the export proceeds realisation period to nine months. Collectively, these measures are expected to improve dollar inflows over time, aiding rupee appreciation. That said, the rupee’s recent weakness has been driven largely by external factors. The conflict involving Iran, the US and Israel continues to influence global sentiment, particularly through its implications for energy markets and the Strait of Hormuz.However, markets received some relief recently. Iran signalled that its latest military operations had concluded, while US President Donald Trump indicated progress towards a ceasefire arrangement and broader negotiations. As a result, sentiment improved and oil prices moderated. Brent crude ($92/barrel) has been trading below $98 over the last two weeks, easing concerns for oil-importing economies such as India.Overall, while external risks persist, lower crude prices and RBI’s measures have helped the rupee remain relatively stable.Chart The rupee, over the last two weeks, has been consolidating within 94.90 and 95.80. The prevailing price action shows no signs of a breach of this price band anytime soon. The sideways crawl might continue for another week.If the local currency breaks out of the barrier at 94.90, it can advance to 94.50 and subsequently to 94.20. However, if the support at 95.80 is breached, we will most likely witness a fresh leg of decline, possibly to 96.80-97 price region.The recent breakout in the dollar can play spoilsport for the rupee. Last Friday, the dollar index surpassed the resistance at 99.50. It marked a high of 100.21 on Monday before moderating to the current level of 99.70.So long as the dollar index stays above 99.50, the bulls will have an edge. That said, there is another resistance at 100.50, which is a crucial level. Hence, there is a chance that the dollar index, for now, has only expanded the trading range from 98.90-99.50 to a broader 98.90-100.50 band.Outlook The rupee appears to be in a consolidation phase. While a stronger dollar poses a risk, softer crude oil prices and improving sentiment could offset some of the pressure. As it stands, the 94.90–95.80 range is likely to remain valid in the near term.Published on June 9, 2026
