The Indian rupee is projected to open weaker on Wednesday, with expectations that it may slip past the 96-per-dollar mark again, as optimism for a swift resolution to the ongoing Middle East conflict diminishes. This remains a concern for portfolio and merchant flows that are skewed against the rupee.
Traders anticipate the currency will open within the range of 95.78 to 95.83, following its previous close of 95.68. Tensions have escalated after Iran announced that the U.S. violated a ceasefire by launching strikes near the contested Strait of Hormuz, complicating efforts to end the three-month-long conflict. Despite a decline in Brent crude oil prices during Asian trading, it remains close to $100 per barrel, impacting oil-sensitive Asian currencies such as the Indonesian rupiah and the Philippine peso.
Economic concerns regarding the repercussions of the conflict on India have led to a continued outflow of foreign portfolio capital. Since March, overseas investors have sold over $24 billion in Indian equities and bonds. The combination of high energy prices and disrupted exports has resulted in India facing a significant balance of payments deficit for the fiscal year ending March 2027.
Deepali Bhargava, regional head of research for Asia Pacific at ING, noted in a report, “Despite relatively strong macroeconomic fundamentals, structural import dependence continues to bias the currency lower.” She forecasts that the USD/INR exchange rate will end the year at 95.50, indicating that risks are tilted toward gradual stabilization rather than abrupt weakness.
In contrast, Asian stock markets showed gains, led by technology-focused indexes in Korea and Taiwan, while futures pointed to a subdued opening for Indian shares. India’s status as the fifth-largest global market by capitalization is under pressure as Taiwan approaches its ranking, supported by the rapid growth of Taiwan Semiconductor Manufacturing Co.
Key indicators include:
- A one-month non-deliverable rupee forward rate at 96.20, with an onshore one-month forward premium of 37 paisa.
- The dollar index registered at 99.12.
- Brent crude futures decreased by 0.8% to $98.8 per barrel.
- The yield on the ten-year U.S. Treasury note is at 4.48%.
- According to NSDL data, foreign investors purchased a net $230.5 million in Indian equities on May 25, while selling a net $20.3 million in Indian bonds the same day.
The article was published on May 27, 2026.
