Indian Rupee Hits Three-Week Low Despite Falling Oil Prices

The Reserve Bank of India intervened through state-run banks to defend the rupee as it hit a three-week low, closing at 95.3950 per dollar on July 6, 2026. The currency reached an intraday low of 95.48, its weakest level since June 12, driven by persistent US dollar demand, merchant requirements, and arbitrage-related outflows. To stabilize the 94.80-95.00 zone, the central bank sold dollars, contributing to a foreign exchange reserve decline of approximately $5.65 billion for the week ending June 26.

Market sentiment shifted on July 7 as the rupee rose 15 paise to 95.28, supported by the Government of Saudi Arabia slashing August crude oil prices for Asia by $11 per barrel, the largest reduction in 26 years. However, these gains were partially offset when a projectile struck a tanker off the coast of Oman near the Strait of Hormuz, causing Brent crude prices to trend higher. Further pressure on the currency persisted as Indian oil companies, including Indian Oil and HPCL, placed tenders for 7 million barrels of crude, maintaining demand for the US dollar.

Analysts describe the underlying market mood as fragile, noting that the rupee failed to rally significantly even as the US dollar index eased and oil prices initially fell. Domestic headwinds include a slowdown in growth, with the June Services PMI dropping to 57.4, while foreign investors provided some support by purchasing 76 billion rupees of benchmark bonds over a two-week period.