The Indian rupee weakened by 14 paise to 86.57 against the US dollar in early trade on Thursday, June 19, 2025, amidst rising global geopolitical tensions, elevated crude oil prices, and strong safe-haven demand for the greenback. Market participants pointed to a growing risk-off sentiment, stemming from uncertainty in the Middle East and signals from the US Federal Reserve, which have kept investors wary and foreign exchange markets volatile.

Opening trends and trading activity

At the interbank foreign exchange market, the domestic currency opened at 86.54, marginally weaker than Wednesday’s close of 86.43. It touched an early high of 86.49 before slipping to a low of 86.57, where it stabilised during the initial hours of trading.

On Wednesday, June 18, the rupee had already slipped 9 paise, dragged down by similar factors and a rising dollar index.

What is weighing on the rupee?

Forex analysts attribute the rupee’s latest depreciation to three major factors:

1. Geopolitical uncertainty in West Asia, particularly the Israel-Iran conflict, has kept markets in a state of nervousness, leading investors to seek safety in the US dollar.

2. Elevated crude oil prices have put pressure on India’s import bill and raised demand for dollars from oil-importing companies.

3. The prevailing risk-off mood globally has made emerging market currencies, including the rupee, less attractive.

“As uncertainty grips the market, the rupee could remain on the weak side in the days to come,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
“For the day, the range is expected between 86.25–86.75 as we await developments in the Middle East and on the global trade front,” he added.

Dollar index and crude oil update

The dollar index, which measures the value of the US dollar against a basket of six major currencies, rose by 0.06% to 98.96, reflecting strong demand for the greenback amid global market jitters.

Brent crude, the international oil benchmark, saw a slight correction of 0.26%, falling to $76.50 per barrel in futures trade. However, prices remain elevated on a weekly basis, largely due to supply concerns and potential disruptions through the Strait of Hormuz, a key oil chokepoint.

Fed stance adds to uncertainty

Adding to the rupee’s woes was the US Federal Reserve’s mixed policy signals. While the Fed kept interest rates unchanged, President Donald Trump publicly criticised the decision and called for an aggressive rate cut of 250 basis points. Despite the political pressure, the Fed maintained its projections of two rate cuts of 25 bps each later in the year.

This ambiguity in future rate policy confused markets, contributing to strength in the dollar as investors priced in only moderate easing.

Indian markets and foreign inflows

On the domestic front, Indian equity markets remained stable. The BSE Sensex rose 33.49 points or 0.04% to 81,478.15, and the Nifty50 gained 22.90 points, or 0.09%, to 24,836.45, signalling investor resilience despite the external pressures.

Foreign Institutional Investors (FIIs) remained net buyers, with data showing ₹890.93 crore of net equity purchases on Wednesday, providing some support to the rupee.

Oil-importer dollar demand remains strong

India imports over 80% of its crude oil needs, and any rise in oil prices or disruptions in supply increase the demand for dollars in the forex market. Forex dealers noted sustained dollar buying by state-run oil refiners and corporates, which has added to pressure on the rupee.

“Even though the Brent correction offers some cushion, the overall outlook remains fragile. Dollar demand from oil and defence sectors continues to outstrip supply,” said a Mumbai-based currency trader.

Outlook for the rupee

Market participants now expect the rupee to remain under pressure in the short term, especially if:

• Crude oil prices remain high

• Geopolitical tensions escalate

• The Fed delays rate cuts or offers more hawkish guidance

However, factors such as:

• A stable equity market

• Resilient foreign inflows

• Gradual recovery in exports

...may offer some support to the rupee, possibly capping losses around the 86.75–87.00 zone.

Conclusion

The Indian rupee’s fall to 86.57 against the dollar reflects broader global uncertainty, heightened by geopolitical risk and volatile crude prices. As long as the Middle East crisis lingers and dollar demand remains elevated, pressure on the rupee is likely to continue, despite support from domestic equities and capital flows.

The market will closely watch Fed commentary, crude oil fluctuations, and any signs of de-escalation in global tensions for cues on the rupee’s direction in the coming sessions.

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