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Informist, Monday, Jun. 15, 2026

 

By Pratiksha

 

NEW DELHI – Faced with its worst crisis in over a decade, India's currency market wanted nothing more than a peace deal between the US and Iran. A deal has now been agreed upon, but currency traders are tempering their optimism on the outlook for the rupee. 

 

The US and Iran Monday agreed on a framework for a peace deal--extending the current ceasefire for 60 days and paving the way for the reopening of the Strait of Hormuz--which sent crude oil prices tumbling.

 

While market participants expect the rupee to appreciate to 93.50 a dollar in the near term, also helped by the Reserve Bank of India's latest measures to attract foreign inflows, they await details of the deal, scheduled to be officially signed Friday in Switzerland. Traders remain uncertain whether the deal will be sustained as questions remain about the fate of several issues. Case in point: in response to the deal announcement, Monday, the rupee rose as much as 0.7% against the dollar during the day but then pulled back to end just 0.4% higher as importers bought dollars.

 

"The peace deal is not permanent. There is still no clarity on the nuclear issue. It is just a 60-day ceasefire," Ritesh Bhansali, deputy chief executive officer at Mecklai Financial Services Ltd., told Informist. "A lot can still go wrong. I would say that rupee is supported for the short term but medium term, it is still not out of the woods. We need the fine print of the deal."

 

Currency traders said the US-Iran peace framework may end months of conflict, but the issue of Tehran's nuclear enrichment remains unresolved. Caution may prevail as, instead of settling the nuclear dispute immediately, Washington and Tehran have agreed to push the matter into a separate negotiating track that will unfold over the next 60 days following the formal signing of the agreement.

 

Then there is Israel, which has fiercely pushed back against the agreement between the US and Iran, saying that any deal brokered by Washington would not be binding on Israel, adding to concern about the fragility of peace in West Asia. 

 

"We have seen sort of a knee-jerk reaction today across markets, but we are still not sure if Israel is down for the deal," Dhiraj Nim, FX strategist at ANZ Bank India, said. "I am not expecting things to be dramatically positive for rupee from here, although risk has shifted to the positive side. We need to see correction in commodities and supply restoration."

 

Amit Pabari, managing director at CR Forex, said that while the peace agreement has significantly improved sentiment, market is likely to remain cautious until the agreement is formally signed and implemented. "For a sustained appreciation in the rupee, markets would like to see three factors: first, crude oil remaining comfortably lower; second, continued foreign portfolio inflows; and third, a stable global dollar environment following the upcoming US Federal Reserve meeting," he added. 

 

Following the announcement of the peace deal, Brent crude August futures slipped over 5% and hit an over-three-month low of $82.52 per barrel Monday. Market participants said if crude oil prices fall and remain below the $80-per-barrel mark in the medium term, the rupee may be well-supported in the near term.

 

"There is still some caution in the market. Plus, many commodities may take longer to correct," Anshul Chandak, treasury head at RBL Bank, said. "Crude has already fallen sharply. It should trade in $75-$85 (per-barrel) range for next three months."

 

While dealers expect foreign flows into Indian markets to trickle in if the peace deal is sustained, most expect the RBI to make the most of the rupee's consequent appreciation to replenish its foreign exchange reserves, thus limiting the rupee's rise. Most dealers expect the central bank to intervene through dollar purchases around 93.00 a dollar.

 

The RBI has had to heavily draw on its foreign exchange buffer as the Indian unit came under immense pressure after the war in West Asia broke out, falling to a record low of 96.96 a dollar last month. The reserves fell to $681.38 billion as of Jun. 5, almost $50 billion lower from the record high just before the war started.

 

"RBI will also want to replenish its reserves and has to deal with its large short forward book," Nim said. "FCNR inflows, coupled with any incremental flows, may be lapped up by RBI." The RBI's short forward dollar book has grown close to $100 billion as of Apr. 30. Market participants expect the central bank's various foreign capital measures to draw around $70 billion-$80 billion in inflows in the medium term. 

 

While the overall outlook has got better for the Indian currency from the start of June, the extent of how much the picture may improve from here on remains uncertain.  End

 

US$1 = INR 94.71

 

Edited by Rajeev Pai

 

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