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Updated - June 03, 2026 at 12:35 PM.
| Mumbai
The Indian rupee weakened to a one-week low on Wednesday, as hostilities in West Asia pushed crude prices higher amid stalled U.S.-Iran peace talks while a drop in local stocks worsened the strain on the currency.
Traders said state-run banks were selling dollars, most likely on behalf of the Reserve Bank of India, helping limit the fall in the rupee. These banks were also spotted conducting dollar-rupee buy/sell swaps, in line with recent sessions.
The rupee fell about 0.5 per cent to 95.7825 per dollar, tracking declines in oil-sensitive regional peers like the Indonesian rupiah, which fell to a record low, and the Philippine peso.
Far-tenor dollar-rupee forward premiums, the cost of hedging forex exposure, declined as banks dealt the swaps, with the 1-year implied yield down 5 basis points to 2.99 per cent.
The scale of swaps by the central bank over the last two weeks has surprised the market and left it wondering why the activity is so aggressive, a trader at a private bank said.
Brent crude rose more than 1 per cent after hostilities in the Gulf flared anew, with the U.S. military saying Iranian missile attacks on Bahrain, Kuwait and other regional targets were either thwarted or failed.
"In many ways, the RBI has become the steady hand shielding the currency from external shocks," said Amit Pabari, managing director at FX advisory firm CR Forex.
The focus now is squarely on the RBI's policy decision on Friday. A majority of economists polled by Reuters expect it to keep rates unchanged, but a section of the market expects measures to support the rupee.
"We believe an FX package and rate hikes are coming, but the precise timing remains uncertain," economists at HSBC said in a note. HSBC says the policy is "a close call" but expects a hold on Friday as inflation remains below target.
Published on June 3, 2026
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