Rupee Jumps 65 Paise to ₹86.11/USD After Crude Drops, Dollar Weakens

The Indian rupee opened on a high note Tuesday, gaining a sharp 65 paise to settle at ₹86.11 against the U.S. dollar, its best level in over a month. What’s behind the move? Easing crude oil prices and a softer dollar, thanks to fresh hopes of a ceasefire in the Middle East.

Markets got a boost after U.S. President Donald Trump announced a complete ceasefire deal between Israel and Iran. According to the announcement, Iran would begin the truce right away, with Israel following 12 hours later. This came on the heels of a limited missile strike by Iran on a U.S. base in Qatar, which was seen more as a signal to de-escalate than provoke.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

That news of the ceasefire sent oil prices sliding. Brent crude futures fell nearly 4%, landing around $69.40 per barrel, down sharply from earlier highs above $79 this month. U.S. crude (WTI) also dropped more than 3%, trading close to $66.48.

Earlier in June, oil had spiked over concerns that the Strait of Hormuz, a major oil route, might be shut down. But with tensions easing, those fears have cooled. Analysts from SBI now expect crude prices to stabilise in the mid-$60s.

Rupee Rises as Oil Falls

Cheaper oil is good news for India, which imports a lot of its crude. Lower prices mean less spending on imports, which improves the trade balance, and that tends to lift the rupee. A Reuters-cited broker said fading Middle East tensions gave investors more confidence and boosted risk appetite.

Moneycontrol data showed the rupee opened at ₹86.1050, compared to its close of ₹86.7525 on Monday. That’s the biggest one-day gain since mid-May. Meanwhile, the U.S. dollar index fell to 98.13, down from 98.42 the previous day.

Lower U.S. Inflation, Rate-Cut Talk Weigh on Dollar

U.S. inflation is cooling, and more voices from the Federal Reserve are hinting at a possible interest rate cut in July. That’s weakening the dollar even further. U.S. 5-year bond yields dropped by 10 basis points to 3.86% after Fed Governor Michelle Bowman struck a dovish tone in her latest remarks.

Indian government bonds rallied, too. The 10-year benchmark yield fell to 6.2853% by 10:00 a.m. IST from 6.3053% the previous day. Lower oil prices and a stronger rupee are helping keep inflation in check, which is good news for bond investors.

Equities joined the rally. The GIFT Nifty shot up nearly 200 points in early trading. The Nifty and Sensex were also up by more than 1%, led by gains in airline, oil marketing, and port stocks, such as ONGC, BPCL, and Adani Ports.

The reason? Falling oil and a weakening dollar mean lower operating costs and improved profit outlooks for Indian companies.

What Analysts Are Saying

Many analysts believe this rally has legs, provided oil prices remain low, and the ceasefire holds. Anil Kumar Bhansali of Finrex Treasury Advisors says the rupee might trade between ₹86.10 and ₹86.15 in the short term, with investors watching two significant events: Jerome Powell’s testimony to Congress and fresh news on U.S. trade tariffs.

Still, he flagged a key risk: until both Iran and Israel officially confirm the ceasefire, markets might stay cautious.

Commodities & Central Bank Watch

Commodities markets are reacting to the lower threat of war. Crude fell around 3%, and experts from RBC Capital and Oxford Energy say we’re no longer seeing that “war premium” that had been inflating oil prices.

Over in the U.S., the Fed is the centre of attention. More officials, including Bowman and Christopher Waller, are hinting that rate cuts could be coming if inflation remains tame. Traders are also keeping an eye on the Bank of England and European Central Bank for similar signals.

India’s Outlook Brightens

Lower oil prices could significantly benefit India’s economy. Subsidies shrink, inflation eases, and growth picks up. That’s good news for both the fiscal deficit and the current account.

However, there is still some geopolitical risk. Iran’s Foreign Minister, Abbas Araghchi, warned that the country won’t stand down unless Israel ends military action by 4 am Tehran time. So, while optimism is building, there’s still reason for caution.

What to Watch Going Forward

Investors will be closely watching the RBI’s next move and global inflation data. If crude oil prices remain low, markets might even start pricing in a rate cut from the RBI, which would boost both the rupee and bond prices.

Today’s 65-paise gain in the rupee is a welcome relief. Easing tensions, falling crude oil prices, and a weaker dollar all contributed to the improvement. However, for this rally to stick, we’ll need real ceasefire confirmation, stable oil prices, and supportive signals from global central banks. For now, though, the mood in the markets is cautiously optimistic.