Indian rupee snaps six-session winning streak as firmer dollar pinches

MUMBAI: The Indian rupee snapped a six-day-long run of gains on Monday, as the dollar hovered near a one-year peak against a basket of peers even as a retreat in oil prices soothed worries over spillovers from the U.S.-Iran war.

The currency ended the trading session at 94.6775 per dollar, down 0.4% from its close on Friday. The rupee had risen about 1% in the preceding six sessions.

Asian currencies declined between 0.3% and 0.7%. A hawkish turn by the U.S. Federal Reserve last week has prompted traders to add to wagers on a rate hike later this year, keeping the dollar index clinging to its highest levels — near the 101 handle — since May 2025.

Futures implied tightening of around 38 basis points by the year-end. Yields on 2-year notes rose as much as 4 basis points to the highest since early 2025 at 4.23%.

“Markets may try to use the next data or Fedspeak catalyst to price in 50bp of Fed tightening in 2026, but unless there is a fresh Middle East escalation, lower oil prices should contain USD gains,” analysts at ING said in a note.

Brent crude oil prices declined nearly 2% after U.S. and Iranian officials made “encouraging progress” at a first round of talks in Switzerland.

While the rupee’s persistent bearish bias has eased in light of the retreat in oil prices and policy measures to draw dollar inflows, traders reckoned that the prospect of higher borrowing costs in the U.S. could dampen the improved sentiment.

Dollar-rupee far forward premiums, which reflect the cost of hedging against rupee depreciation, rose on Monday with the 1-year forward implied yield up 10 bps at 2.95%.

Bankers also expectthat hedging of interest obligations on foreign currency deposits, raised under aforementioned measures to draw dollar flows, would likely steepen the forward curve.