A man counts Indian currency notes at a roadside currency exchange stall in the old quarters of Delhi, India, February 2, 2026. REUTERS
MUMBAI, May 26(Reuters) – The Indian rupee’s three-day winning streak is likely to run into resistance on Tuesday as fresh U.S. strikes in the Middle East dent optimism over an imminent peace deal with Iran, with traders also expecting month-end flows to weigh.
The rupee is expected to open in the 95.25-95.30 range, per traders, after ending at 95.23 on Monday.
U.S. forces conducted strikes in southern Iran on Monday as “defensive actions.” Brent crude oil futures rose by over 2% to $98.3 per barrel, bouncing off their lowest level in over two weeks.
Optimism over an end to hostilities in the Middle East, alongside dollar-selling interventions by the central bank, have helped steady the currency after it hit a record low of 96.96 last week.
The recovery could face hurdles on Tuesday, though, due to elevated dollar demand from month-end importer payments and contract maturities in the non-deliverable forwards market, traders said.
“Pressure is likely to be on the upside (on USD/INR), so it will also be key to watch if the central bank steps in to cap the pair,” a trader at a state-run bank said.
The central bank will do “whatever is required” to ensure orderly movements in the foreign exchange market, Reserve Bank of India Governor Sanjay Malhotra said in an interview on Monday.
Indian banks have sought subsidised forex hedging costs from the Reserve Bank of India to raise overseas borrowings, Reuters reported earlier, as the central bank seeks to shore up dollar inflows into the economy.
India raised prices of compressed natural gas on Tuesday, a day after state-owned fuel retailers increased prices for the fourth time in May.
Following the increase in petrol and diesel prices, economists at Goldman Sachs have raised their consumer inflation forecast for fiscal year 2026-27 by 10 bps to 5.2%. It expects the RBI to raise rates twice by 25 bps each in October and December.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 95.63; onshore one-month forward premium at 36 paisa
** Dollar index at 99.05
** Brent crude futures up 2% at $98.1 per barrel
** Ten-year U.S. note yield at 4.51%
** As per NSDL data, foreign investors sold a net $548.1mln worth of Indian shares on May. 22
** NSDL data shows foreign investors bought a net $31.6mln worth of Indian bonds on May. 22
Reporting by Jaspreet Kalra; Editing by Rashmi Aich
