Rupee Crashes, Then Recovers: Will RBI’s June 5 Decision Change Everything?

Key Takeaways

• The rupee opened at 95.70 June 4,2026 and later rose to 95.69 amid nerves that geopolitical tensions and fund outflows would continue to hit it. 
   
• The Wednesday session saw a slide of 40 paise-on the back of stymied US-Iran negotiations and a climb back above the $96 per barrel mark for crude oil. Thursday morning brought a small measure of relief for the rupee.

Rupee Gets a Breather, Though Not Much of One

Seven paise up. That is all the rupee could manage on Thursday morning. At the interbank foreign exchange market, it opened at 95.70 and briefly touched 95.69, up 7 paise from Wednesday’s close of 95.76. The prior session was rough. A 40 paise drop in one day is not something traders shrug off easily. 

The West Asia situation is what is keeping everyone nervous. US-Iran talks have not moved anywhere meaningful. Forex traders said a prolonged crisis in the region poses a serious risk for India, given how much the country depends on energy imports. When oil gets expensive and stays that way, the rupee tends to follow it down. 

Crude at $97, Investors Pulling Out: The Numbers Tell the Story

Brent crude was down 0.93% at $96.90 per barrel in futures trade on Thursday, while the dollar index was at 99.47, down 0.06%. These are not alarming levels in isolation.

But they come on top of weeks of sustained foreign selling in Indian equities.

Foreign investors have pulled out roughly $26.4 billion from Indian markets in 2026 so far, crossing last year’s full-year outflow figure. Indian companies also sent $48.39 billion abroad as overseas direct investments in FY26, while resident remittances overseas touched $28.9 billion. All of that is dollar demand going out of India.

What the Experts Are Saying Ahead of the RBI Call?

Amit Pabari, MD at CR Forex Advisors, put it plainly, “For India, every rise in crude oil carries an additional burden. Like an unexpected increase in household expenses, higher oil prices mean more dollars are required to meet import needs, often putting pressure on the rupee.”

On the RBI meeting due June 5, Pabari said, “Ordinarily, markets would be debating growth and inflation. However, policymakers also have to consider a rapidly weakening rupee, elevated oil prices, and shifting global interest-rate expectations.” 

Anindya Banerjee of Kotak Securities added that immediate resistance for the rupee sits at 96 per dollar, with support at 95. A swift resolution in West Asia, he said, would likely reverse the downtrend.

Conclusion

Thursday’s small gain counts for little if oil stays high and foreign money keeps leaving. June 5 is the date that matters now. What the RBI says, and how it positions itself on rates and currency, will decide where the rupee heads next.

FAQs

Why did the rupee slip to 95.76 against the dollar, even with the minor recovery?

The rupee’s downward bias was largely on account of the increase in prices of crude oil, uncertainty over the US-Iran talks and on-going foreign investor selling in Indian markets. This in turn has pushed the dollar higher while pulling the Indian currency lower.

Why was the fall in the rupee coupled with a drop in the Sensex?

Weakening rupee sometimes leads to risk aversion for investors, primarily because the country’s foreign exchange holdings get depleted while there are strong outflow of foreign funds. Here, there was not only a sharp pull of foreign money out of Indian market but also the high crude price concerns were a factor.