The Indian rupee opened 13 paise weaker at 94.66 against the US dollar on Thursday, 18 June, after the US Federal Reserve delivered a hawkish surprise, strengthening expectations of a possible interest rate hike later this year.
At its latest policy meeting, Fed officials adopted a more aggressive stance than markets had anticipated, with 9 of 18 policymakers projecting at least 1 rate increase in 2026. This was significantly higher than market expectations, with Goldman Sachs previously estimating that only around three members would signal the need for further tightening.
According to a Reuters report, Goldman Sachs also highlighted concerns around the Fed’s inflation outlook. The central bank’s median forecast for core PCE inflation in 2027 was revised to 2.5%, above the investment bank’s estimate of 2.3%, suggesting inflationary pressures may remain persistent.
The Fed’s updated projections have increased the likelihood of further policy tightening later this year. However, Goldman Sachs maintained its base-case expectation that the US central bank will keep interest rates unchanged through the remainder of the year, despite the more hawkish tone.
Rupee extends recovery as sentiment improves
According to market experts, the Indian rupee continues to benefit from a combination of supportive domestic and global factors. On Wednesday, the currency touched an intraday high of 94.29 against the US dollar, its strongest level in six weeks, extending gains for a fourth consecutive session.
Analysts noted that the rupee has appreciated nearly 1.5% since trading around 95.70 before the Reserve Bank of India’s recent policy measures. The recovery has been aided by easing crude oil prices, improving risk appetite and expectations of stronger foreign capital inflows.
Foreign flows add momentum
Experts pointed out that foreign investors have been increasingly allocating capital to Indian debt markets, providing an additional tailwind for the currency. Bond inflows have already exceeded $3 billion in June, putting the month on track to record the strongest fixed-income inflows of the year.
The sustained interest in Indian debt reflects growing confidence in the country’s macroeconomic stability and the supportive measures announced by the RBI, analysts said.
Equities rally on easing global risks
The improvement in sentiment has also been reflected in the equity markets. According to experts, benchmark indices have staged a strong recovery over the past few sessions, supported by falling oil prices and reduced geopolitical concerns.
Over the last four trading sessions, the Nifty 50 has gained around 4%, while the Sensex has advanced approximately 4.5%, as investors responded positively to the improving global backdrop.
Trade deals strengthen India’s growth narrative
Market participants also highlighted India’s expanding global trade relationships as a key factor underpinning investor confidence. Progress in trade negotiations with the United States, the upcoming implementation of the India-UK Free Trade Agreement, and expectations of an India-European Union trade pact later this year have reinforced optimism around India’s long-term growth prospects.
Experts noted that market trends are often driven not by a single transformative event but by the cumulative impact of several improving factors. In the current environment, easing oil prices, moderating geopolitical risks, stronger foreign inflows and improving trade prospects are collectively contributing to a more constructive outlook for the rupee and Indian financial markets.
Rupee Outlook
According to Amit Pabari, MD, CR Forex Advisors, the rupee remains well supported by lower oil prices, strong bond inflows and improving market sentiment. On the upside, 95.00-95.30 is now a strong resistance zone for USDINR. With USDINR having decisively broken below 94.80, the pair could gradually move towards the 94.00-93.80 zone in the coming days.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
