• Indian Rupee softens against the US Dollar as US strikes on Iranian nuclear sites fuel safe-haven demand.
• USD/INR holds near 86.73 during European trade; traders eye RBI action if 87.00 is breached.
• India’s Composite PMI jumps to 61.0, beating forecasts and signaling robust economic momentum.

The Indian Rupee (INR) kicked off the week on a softer note, weakening against the US Dollar (USD) on Monday as investors flocked to the Greenback after the United States (US) launched airstrikes targeting Iranian nuclear facilities over the weekend.

The USD/INR pair is holding its ground, trading around 86.73 at the time of writing during the European session, having touched an intraday high of 86.85 earlier in the day. Despite safe-haven flows favoring the US Dollar as markets await an Iranian response, the Rupee’s downside has been partly cushioned by stronger-than-expected domestic PMI data and a pullback in Crude Oil prices from their early session spike. Traders remain cautious, with the pair consolidating just below the 87.00 mark as markets weigh further geopolitical headlines and global risk sentiment.

Heightened geopolitical friction in the Middle East has rattled global markets to start the week after the US reportedly launched airstrikes targeting key Iranian nuclear sites, escalating an already volatile standoff involving Israel and Iran’s regional influence. The latest attacks have amplified concerns about potential retaliatory actions and a broader regional conflict that could disrupt Oil flows through the Strait of Hormuz, a crucial artery for global crude shipments. In response, Crude Oil prices spiked sharply at the weekly open, while investors sought refuge in the US Dollar, lifting it against emerging market currencies, such as the Indian Rupee.

India finds itself squarely in the line of fire whenever Oil spikes; any sustained surge in Oil prices is a double-edged sword — it widens the trade deficit, stokes imported inflation, and weakens the Rupee by pressuring the current account balance. On Monday, Brent Crude jumped above $81 per barrel in early Asia, fueling risk-off flows that pushed the INR lower against the Greenback. However, as traders reassessed the risk of immediate supply disruptions, Oil prices cooled back toward $75–77 per barrel, trimming the initial drag on the Indian Rupee. Still, with the risk of escalation hanging in the air, traders are likely to stay cautious, keeping the INR’s recovery attempts on a tight leash.

Market movers: Geopolitical fears, resilient domestic data and RBI watch

• The Rupee has been under pressure, sliding to its weakest level in three months last week before staging a mild recovery to close at 86.59 on Friday. Despite Monday’s resilience, traders remain wary that a decisive break above the 87.00 mark — a level last seen in March — could spark sharper volatility in the currency market, potentially triggering capital outflows and complicating the inflation outlook. A sustained breach could also force policymakers to reassess their monetary policy stance to manage imported price pressure.
• The Reserve Bank of India (RBI) is expected to step in if the Rupee weakens further toward the key 87.00 per US Dollar mark, according to analysts at Australia & New Zealand Banking Group (ANZ) and MUFG Bank. The Rupee is currently the worst-performing Asian currency this quarter. “The 87 level is very much on the cards if Middle East tensions escalate and the crisis turns regional,” said Dhiraj Nim, currency strategist at ANZ. “That would be tantamount to a shock, and the RBI won’t like that. The RBI won’t be comfortable with anything beyond 87 per Dollar.”
• India PMI data surprises to the upside: India’s latest PMI figures provided a bright spot amid geopolitical jitters. Flash data showed the HSBC India Composite PMI rose sharply to 61.0 in June 2025 from 59.3 in May, comfortably beating market forecasts of 59.4 and notching its strongest print since April 2024. The Manufacturing PMI also surprised to the upside, climbing to 58.4 from 57.6 a month earlier, marking its highest level in two months and topping expectations of 57.7. Meanwhile, the Services PMI advanced to 60.7 from 58.8, indicating the fastest pace of growth in the sector since August.
• Global investors remained cautious on Monday amid fresh geopolitical tensions, keeping risk appetite subdued across markets. Most major equity indices in Asia and Europe traded lower but avoided sharp sell-offs. In India, benchmark indices ended in the red, snapping recent momentum as global uncertainty weighed on sentiment. The Sensex closed down 511.38 points, or 0.62%, at 81,896.79, while the Nifty slipped 140.50 points, or 0.56%, to settle just below the psychological 25,000 mark at 24,971.90.
• Brent and WTI Crude benchmarks jumped to fresh five-month highs early Monday — Brent touched $81.40, WTI hit $78.40 — following US strikes on Iranian nuclear sites that stoked supply disruption fears. However, prices later eased on tempered fears, with Brent drifting back to $75.55 and WTI near $73.25 at the time of writing. The retreat provides some relief for India’s Oil import bill, but risks remain if regional tensions flare up again.
• India’s heavy reliance on imported Crude means any sustained spike in Oil prices can have sweeping economic consequences. The country sources about 85% of its Oil needs from overseas markets, leaving it highly exposed to global price swings. According to a Reuters report citing fresh government data, India’s crude oil imports surged to a record 23.32 million metric tonnes in May, marking a 9.8% MoM increase as refiners ramped up purchases to meet robust domestic demand. This dependency amplifies the currency’s vulnerability to geopolitical shocks and keeps the focus firmly on Brent’s trajectory.
• Looking ahead, markets will stay alert to any fresh headlines from the Middle East as traders watch for potential Iranian retaliation following the recent US strikes on nuclear sites. Any escalation could trigger safe-haven inflows into the US Dollar, push oil prices higher again, and weigh on riskier assets and emerging market currencies, such as the Rupee. In addition to geopolitical risks, investors will monitor the US PMI data due later in the day for fresh insights into economic momentum, alongside speeches from Fed Bowman and Goolsbee that could offer clues on policymakers’ appetite for future rate moves and impact the US Dollar’s near-term trajectory.

Technical analysis: bullish bias intact above 86.50, 87.00 in focus

From a technical perspective, the USD/INR pair has broken convincingly out of a multi-week symmetrical triangle, confirming a bullish bias in the near term. The breakout above the descending trendline has attracted fresh buying interest, pushing the pair to a three-month high while holding comfortably above its 21-period Exponential Moving Average (EMA), currently near 86.52. Momentum remains firm, with the Relative Strength Index (RSI) hovering around 64, not yet in overbought territory but signaling strong underlying demand. As long as the pair stays above the breakout zone near 86.00–86.10, the path of least resistance appears skewed to the upside. Traders will be eyeing the psychologically important 87.00 mark next; a decisive close above this could open the door for further gains toward 87.25 or even 87.50.

On the other hand, a drop back below the 21-period EMA support could invite some profit-taking. However, the broader technical structure favors dip-buying as long as geopolitical tensions continue to support safe-haven flows into the US Dollar.