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Rupee edges higher as capital inflows and RBI support offset Iran risk
The rupee’s gains are being tempered by renewed oil-price risk tied to expected US sanctions on Iran, which could pressure India’s energy import costs.
The Indian rupee edged higher against the US dollar for a second straight day on Monday, helped by strong capital inflows even as traders watched for shifts in oil prices and possible Reserve Bank of India interventions, according to FXStreet.
Pressure on the rupee eased temporarily as crude prices dipped amid investors taking profits ahead of expected US announcements about stricter sanctions on Iran. FXStreet noted that crude could rebound after US Treasury Secretary Scott Bessent indicated Washington plans to impose unprecedented sanctions on Iran, potentially disrupting Iranian oil shipments and constraining global energy supply.
FXStreet also tied the currency outlook to ongoing geopolitical stress around the Strait of Hormuz, where vessel transit remains below historical averages. The report said these risks are a particular concern for India, which is the third-largest global crude importer and saw record foreign investor equity outflows earlier this year as oil costs rose.
The central bank’s actions are expected to cushion the rupee, FXStreet reported, citing nearly $73 billion accumulated under initiatives launched in June to support India’s balance of payments. MUFG/BTMU said recent Reserve Bank of India communication marked a shift toward a tighter stance, with August MPC minutes described as more hawkish than what the policy meeting delivered, implying the easing cycle may be ending.
Meanwhile, Indian equities opened slightly higher after two weeks of losses, with the Nifty 50 and BSE Sensex down 0.5% and 0.6% last week, respectively, FXStreet added, as crude prices rose and bond yields climbed amid escalating Middle East tensions.
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