Rupee Tests ₹86 Level as Geopolitical Easing and Dollar Demand Drive Early Moves, Opens 3 paise lower at ₹86.02

The Indian rupee began trade on June 25, 2025, marginally lower against the US dollar, testing the ₹86 level as conflicting cues from global markets and domestic dollar demand weighed on sentiment. The currency opened at ₹86, down from the previous close of ₹85.97, reflecting a cautious stance from traders even as geopolitical tensions in West Asia showed signs of easing.

Geopolitical Developments and Market Reaction

The backdrop of the rupee’s movement is shaped by the evolving situation in West Asia. Recent days have seen a tentative de-escalation in the Israel-Iran conflict, which had earlier sent global oil prices soaring and triggered risk-off flows into safe-haven assets. The announcement of a potential ceasefire brought relief to global markets, with crude prices retreating from recent highs and risk appetite improving. Following the ceasefire, the crude oil prices fell almost 15% over two sessions. Brent Crude is trading at $67.90, gaining 1.13% per barrel, while WTI crude prices were higher by 1.24% at $65.17.

However, the rupee’s muted response-opening slightly weaker despite the positive geopolitical developments indicates persistent dollar demand from importers and cautious positioning by market participants. Traders are also monitoring the Reserve Bank of India’s (RBI) intervention strategy, as the central bank has been active in curbing excessive volatility in the currency market.

Currency Market Dynamics

On June 24, the rupee had strengthened significantly, closing near ₹85.97-₹86.00, buoyed by the sharp drop in oil prices and improved risk sentiment. The currency’s performance over the past week has been volatile, with the USD/INR pair fluctuating between ₹85.94 and ₹86.84. The average exchange rate for June so far stands at approximately ₹86.00, aligning with the year-to-date average of around ₹86.10.

Forex analysts note that while the rupee has benefited from the easing of geopolitical tensions, it remains vulnerable to renewed bouts of dollar strength and shifts in global risk appetite. Importers’ demand for dollars, particularly from oil companies, continues to exert pressure on the currency, especially during periods of global uncertainty.

Global and Domestic Influences

Globally, the US dollar index has shown resilience, trading near multi-week highs, which has limited the rupee’s upside. Meanwhile, domestic equity markets have been buoyant, with robust inflows from foreign institutional investors supporting the broader risk environment. However, these inflows have not been sufficient to offset the persistent dollar demand in the forex market.

The RBI’s presence in the market has provided a degree of stability, with the central bank reportedly selling dollars at key levels to prevent excessive depreciation of the rupee. Traders expect the RBI to continue its calibrated approach, balancing the need for currency stability with the objective of maintaining adequate forex reserves.

Conclusion

The Indian rupee opened slightly lower on June 25, testing the ₹86 level, as easing West Asia tensions were offset by persistent dollar demand and cautious market sentiment. While geopolitical de-escalation has provided some relief, the currency remains sensitive to global risk flows and domestic importers’ needs. The RBI’s active presence in the forex market continues to lend stability, with the rupee expected to trade range-bound in the coming sessions

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