Rupee Faces Uncertain Waters Amid Global Tensions and US Dollar Weakness

The Indian rupee is anticipated to hover in the range of 85.25 to 86.25 against the US dollar in the short term, according to a recent Bank of Baroda report. The report warns of potential instability for the rupee stemming from rising geopolitical tensions and possible shifts in US tariffs.

Analysis indicates a 0.6% depreciation of the rupee in June 2025, following a 1.3% decline in May. The downturn intensified in the second week of June after reports emerged of a conflict between Israel and Iran, causing a sharp 0.6% drop on June 13, marking the rupee's largest one-day fall in a month. The currency, while currently stabilizing, continues to trade above 86 per dollar.

Despite these challenges, the rupee's performance aligns with global trends, seeing a rebound amid a weakening US dollar. The dollar index fell by 1.3%, influenced by tempered US inflation and mixed labor market data—factors enhancing expectations for a US Federal Reserve interest rate cut. As global uncertainties linger, India's hefty forex reserves are projected to buffer the rupee against further volatility.

(With inputs from agencies.)