Rupee falls 23 paise to close at 85.73 against U.S. dollar on weak equities, higher crude oil prices

MUMBAI:
The Indian rupee ended Monday (June 30, 2025) lower by 23 paise, closing at 85.73 (provisional) against the U.S. dollar, dragged down by weak domestic equities, a bounce back in crude oil prices, and month-end dollar demand from importers.

The domestic currency, which had opened stronger on improved global risk sentiment, reversed its early gains as the trading session progressed, reflecting the impact of global commodity markets and local investor mood.

Intraday movement

At the interbank foreign exchange, the rupee opened at 85.48 against the greenback, briefly touched an intraday high of 85.44, and slid to a low of 85.77 before closing at 85.73 (provisional).

This marked a 23 paise decline from its previous close of 85.50 on Friday (June 27, 2025), when the rupee had posted a gain of 22 paise.

Factors behind the fall

Forex traders said the rupee’s early strength was supported by positive global risk sentiment and a weaker dollar overseas. However, sentiment turned negative as domestic equities fell sharply, and oil prices staged a mild rebound.

“Indian rupee declined on Monday on weak domestic equities and a bounce back in crude oil prices. Month-end dollar demand also pressured the domestic currency,” said Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan.

Choudhary added that weakness in the U.S. dollar index globally prevented a sharper fall in the rupee, offering some cushion despite the domestic pressures.

Oil prices and equity markets

Crude oil prices, a major driver of India’s trade balance and inflation outlook, firmed slightly, weighing on the rupee.

• Brent crude, the global benchmark, was trading down 0.28% at $67.58 per barrel in futures trade on Monday.

• However, analysts noted that even small upticks from recent lows tend to raise concerns about India’s import bill.

Meanwhile, domestic equity markets posted broad-based losses.

• The 30-share BSE Sensex fell 452.44 points, or 0.54%, to close at 83,606.46.

• The Nifty 50 dropped 120.75 points, or 0.47%, to end at 25,517.05.

Weak equities typically signal lower foreign inflows and risk-off sentiment, which can put pressure on the rupee.

Analyst outlook and trading range

Looking ahead, forex analysts expect the rupee to trade in a narrow band this week, with potential for mild recovery if the U.S. dollar continues to weaken globally.

“We expect the rupee to gain on weakness in the U.S. dollar in improved global risk sentiments. However, any recovery in crude oil prices may cap sharp gains,” said Mr. Choudhary.

He forecast the USD-INR spot price to trade in a range of 85.30 to 85.85 in the near term.

Dollar index trends

The U.S. dollar index, which measures the greenback’s strength against six major global currencies, fell 0.26% to 97.14 on Monday.

The decline followed better-than-expected inflation data from the U.S., which reduced bets on aggressive Federal Reserve rate hikes and supported emerging-market currencies.

Month-end dollar demand

In addition to market fundamentals, traders cited month-end dollar demand from importers and corporates as a regular factor weighing on the rupee.

Such demand typically rises as businesses settle overseas payments before the close of the month and quarter, creating temporary spikes in dollar buying.

Forex reserves update

Adding to market attention, the Reserve Bank of India (RBI) on Friday reported that India’s foreign exchange reserves had declined by $1.01 billion to $697.93 billion for the week ended June 20, 2025.

This marked a reversal from the previous week, when reserves had jumped $2.29 billion to $698.95 billion.

India’s forex reserves had touched an all-time high of $704.885 billion in September 2024, providing the central bank with a sizable buffer to manage volatility in the currency markets.

Foreign investor flows

Despite Monday’s rupee weakness, foreign institutional investors (FIIs) remained net buyers of Indian equities in recent sessions.

• On Friday (June 27, 2025), FIIs purchased equities worth ₹1,397.02 crore on a net basis, according to exchange data.

• Such flows can offer medium-term support to the rupee, though they are often overshadowed by short-term moves in global risk appetite and commodity prices.

Broader context

The rupee’s path in recent months has been marked by high sensitivity to global crude oil trends, capital flows, and U.S. monetary policy signals.

The RBI has intervened occasionally in the spot and forwards markets to smooth volatility but has largely allowed the currency to adjust in line with fundamentals.

Analysts say the RBI’s large reserves position allows it to manage excessive volatility while avoiding sharp one-sided moves.

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