Rupee posts biggest gain in six weeks as oil slump, inflows lift sentiment

Domestic currency outperformed Asian peers as falling crude oil prices, sustained foreign inflows and RBI intervention boosted sentiment and eased pressure

The rupee posted its biggest single-day gain in around six weeks on Monday as a sharp fall in crude oil prices and continued foreign capital inflows lifted sentiment, while the Reserve Bank of India (RBI) was seen absorbing dollars to rebuild its foreign exchange reserves.

 

The domestic currency settled at 95.89 per dollar, up 0.70 per cent from its previous close of 96.57, marking its strongest one-day gain since June 5, when it had appreciated 0.90 per cent. The rupee outperformed its Asian peers, with the Thai baht, Taiwan dollar, and Philippine peso gaining between 0.3 per cent and 0.4 per cent against the US dollar.

 

 

The recovery came after Brent crude tumbled 6.6 per cent to around $86.3 a barrel, its steepest daily decline since May 25, 2025, easing concerns over India's import bill and inflation after supply disruption fears linked to tensions in West Asia receded.

 

"The sharp correction in crude provided immediate relief to the rupee, while persistent foreign inflows into debt and FCNR (B)-related dollar supplies have improved overall market sentiment," said a dealer at a state-owned bank. 

 

Despite Monday's rally, the rupee remains down 6.3 per cent against the dollar so far in calendar year 2026, making it one of the weaker-performing Asian currencies this year. Since the escalation of the Iran-Israel conflict, the currency has fallen 5.1 per cent.

 

“The Indian rupee has surged to become Asia’s top performer, supported by timely central bank intervention and focused policy measures that have effectively restored foreign investor flows," said Dilip Parmar, senior research analyst, HDFC Securities.

 

"Global market dynamics have amplified these gains, with plunge in crude oil prices, a retreat in the dollar index, and a renewed risk on environments,” Parmar added.

 

Government bond yields also softened, with the benchmark 10-year yield settling at 6.77 per cent, down 5 basis points (bps) against the previous close. The yield on the benchmark government bond has softened by 26 bps so far in the current financial year of 2026-27 (FY27).

 

Traders said the rupee's near-term direction will depend on the sustainability of crude prices, the pace of FCNR (B) inflows, and the RBI's intervention strategy, with month-end dollar demand from importers likely to limit further gains.