Rupee opens higher, then settles lower amid oil and geopolitical jitters

The Indian rupee opened higher on Monday (August 24, 2026), rising 7 paise to 95.64 against the US dollar in early trade, before giving up gains to settle 3 paise lower at 95.74 (provisional). The initial strength was attributed to a softer US dollar, but simmering geopolitical tensions and elevated crude prices capped gains, according to forex traders.

At the interbank foreign exchange, the rupee opened at 95.68 and touched an intraday high of 95.64. It later fell to a low of 95.75 and closed at 95.74. On Friday (August 21), the rupee had settled higher by 3 paise at 95.71.

Forex traders said the USD/INR pair traded in a narrow range as rising Brent crude prices, persistent importer demand, and cautious sentiment over new US sanctions targeting Iran weighed on investor sentiment. Washington is set to unveil a fresh wave of sanctions on Iran, targeting its oil trade, banking network, and shipping routes.

"The worry for markets isn't just Iran; it's who else gets caught in the crossfire, since several major economies continue to engage with Iranian trade in some form. Until the details are out this evening, oil and currency markets are likely to stay cautious," said Amit Pabari, MD of CR Forex Advisors.

Dollar index and crude movements

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 98.82, higher by 0.03%. Brent crude, the global oil benchmark, was trading lower by 1.32% at $93.14 per barrel in futures trade, according to one set of figures. Another report put Brent at $92.86 per barrel, down 1.62%, while the dollar index was at 98.98, up 0.18%. The variation reflects the different timings of the reports.

Equity markets and fund flows

On the domestic market front, the Sensex climbed 202.42 points to 77,744.15 in early trade, while the Nifty was trading up 55.35 points at 24,309. However, by the close, the Sensex fell 171.72 points to settle at 77,369.11, and the Nifty declined 32.95 points to 24,219.05.

Foreign institutional investors offloaded equities worth ₹542.71 crore on a net basis on Friday, according to exchange data. India's forex reserves jumped $9.905 billion to $716.907 billion for the week ended August 14, the Reserve Bank of India (RBI) said on Friday.

RBI intervention and surprise swap window move

In a separate development, the Reserve Bank of India likely intervened in the foreign exchange market on Monday to protect the rupee against pressure arising from uncertainty over the US-Iran standoff and corporate hedging flows, five traders told Reuters. The rupee was little changed at 95.6425 per dollar in early trading. State-run banks were spotted offering dollars, most likely on behalf of the RBI, traders said. They reckoned that robust inflows under policy measures to strengthen India's balance of payments have bolstered the RBI's ability to support the rupee.

However, another report highlighted a surprising move by the RBI: it shortened the foreign-currency deposit swap window by one month to August 31. The decision, which took most bankers by surprise, led the rupee to weaken past 95.50 on Monday despite broad dollar weakness, and central bank intervention failed to prevent the rupee's decline.

A currency trader at a private sector bank said the rupee was already facing a "challenging" outlook, and the RBI's decision has made the picture considerably weaker. With oil prices now well above $90 per barrel, the currency faces significantly larger downside risks, he said.

Outlook and broader pressures

Asian cues were largely negative for the rupee, with oil-sensitive currencies dipping. Risk appetite was dented by rising US bond yields, which are moving higher despite markets increasingly expecting that the Federal Reserve will not hike interest rates next month. The 30-year US Treasury yield rose to its highest in more than two decades, and the 10-year yield stood at 4.714%.

A US-Iran truce expired, and Tehran said it would shift to a "fully offensive" military posture, driving oil prices higher. The rise in crude contributed to the increase in US Treasury yields. US President Donald Trump told a Fox News reporter that Iran should surrender.

Looking ahead, traders expect the rupee to open in the 95.68 to 95.72 range on Tuesday, after settling at 95.6025 to the dollar on Monday. Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, said: "We expect the rupee to trade with a slight negative bias on uncertainty between the US and Iran. Elevated crude oil prices may also weigh on the rupee. However, overall weakness in the US dollar on declining odds of a rate hike may support the rupee at lower levels. USDINR spot price is expected to trade in a range of 95.50 to 96."

Meanwhile, on August 20, India relaxed regulations regarding rupee export payments, aligning them with foreign-currency earnings for trade-policy advantages, with the objective of encouraging broader utilisation of the local currency in international trade.