Indian rupee ekes out first quarterly gain in five on oil drop, policy salvo

MUMBAI: The Indian rupee logged its first quarter-on-quarter gain since March 2025, even though it slipped on Tuesday, thanks to a sharp retreat in oil prices and a salvo of policy measures to draw dollar inflows.

The currency ended the day at 94.66 per dollar, down slightly from its close at 94.54 in the previous session as the dollar firmed. The rupee is up 0.3% on the month and about 0.2% over the course of the quarter ending June 30.

Earlier in the quarter, the rupee fell to record-low levels near 97 per dollar in May before recovering to stand among the best regional performers in June.

The U.S. and Iran’s fragile interim peace deal came as a relief to oil-import-dependent India. Crude oil prices cooled to about $73 on Tuesday from the quarter’s highs of over $120 a barrel.

Given the improved backdrop, Goldman Sachs analysts have raised their 2026 growth forecast for India by 30 basis points, lowered their inflation projection by 20 bps and now expect a balance of payments surplus of 0.7% of GDP.

This improvement could support the rupee, even as traders maintain that room for gains will be limited by importers’ dollar demand and potential dollar buying by the central bank to rebuild FX reserves that had dropped to the lowest in a year.

Traders will also watch the dollar’s trajectory, which has been on an upswing on expectations of tighter monetary policy in the U.S. to contain the war-fuelled inflation.

On Tuesday, the dollar index rose 0.2% to 101.3.

The firmer greenback alongside likely portfolio outflows weighed on the rupee, a trader at a private bank said.

The focus now turns to U.S. labour market data peppered through the week alongside upcoming remarks from Federal Reserve Chair Kevin Warsh on Wednesday.

“Investors are betting that labour market resilience will mean that the Fed will keep a hawkish bias intact for the next several quarters,” DBS analysts said in a note.