Indian Rupee Declines Amid US-Iran Tensions and Dollar Demand

The Indian rupee experienced volatility between June 29 and June 30, 2026, opening strong at 94.35 before declining to approximately 94.58 against the US dollar. The currency's early gains were driven by foreign investment into government bonds and foreign exchange reserves reaching $672.59 billion. However, these gains were reversed as military exchanges between the United States and Iran intensified, including US airstrikes on Iran and Iranian missile attacks on Bahrain and Kuwait.

By June 30, the rupee continued to slide due to month-end and quarter-end dollar demand from banks, importers, and oil companies. A hawkish Federal Reserve also strengthened the US dollar, further pressuring the rupee. The Reserve Bank of India intervened by buying dollars to support exporters during this period. Domestic markets mirrored this instability, with the Sensex dropping over 372 points.

Despite the currency pressure, US Ambassador Sergio Gor announced that a US-India trade deal is in its final steps, with only one percent of negotiations remaining. Meanwhile, the US and Iran agreed to a temporary pause in attacks to attend a summit in Doha, Qatar, aimed at stabilizing the truce and addressing shipping security in the Strait of Hormuz.