Overview
- The rupee closed at 95.76 to the US dollar on Wednesday, June 3, after several days of losses driven by a firmer dollar and rising crude prices.
- The RBI has been selling dollars and running dollar‑rupee buy/sell swaps in almost every session since mid‑May to limit losses and lower forward hedging costs.
- Renewed US–Iran tensions pushed Brent toward the high‑90s per barrel and the Office of the US Trade Representative’s proposed 12.5% duties on imports dented investor sentiment, while foreign portfolio investors have withdrawn roughly $27 billion so far this year.
- Markets are focused on the RBI Monetary Policy Committee decision on June 5 for possible administrative measures to curb volatility because many analysts expect tools other than a sharp rate hike to be used; BofA has warned the rupee could weaken toward about 98 per dollar by July if the energy shock and outflows persist.
- A sustained oil shock would raise consumer fuel prices and imported inflation, squeeze growth by increasing import bills for companies and households, and keep the central bank weighing reserve use and capital‑flow rules against the cost of tighter monetary policy.