The Indian rupee weakened by 35 paise on Monday, closing at 94.68 per dollar and ending a six-day winning streak. Increased demand for dollars from importers, combined with a stronger dollar index, outweighed the benefit of lower global oil prices. Market focus is now shifting toward potential foreign currency inflows from the government's new FCNR(B) deposit scheme.
What Happened
The Indian rupee saw a pullback on Monday, depreciating by 35 paise to settle at 94.68 against the US dollar. This move snapped a six-day winning streak for the domestic currency. The decline comes despite lower global crude oil prices, which typically help the rupee by reducing the import bill for oil, India's largest import. The currency now trails several other Asian peers, having depreciated by 5.37% so far in 2026.
Why The Rupee Lost Ground
The primary pressure on the currency came from a surge in demand for US dollars. Importers and traders were active in the market, buying dollars to protect themselves against future price changes. This buying activity was coupled with a rise in the dollar index, which measures the US currency against a basket of six major world currencies. The dollar index hit 100.89 on Monday, its highest level since May 2025, creating a difficult environment for emerging market currencies, including the rupee.
The Impact Of Import Demand
While lower oil prices—hovering around $79 a barrel—usually act as a supporting factor for the rupee, they were not enough to stop the slide this time. When importers rush to buy dollars, it creates immediate demand that overrides the indirect benefits of cheaper commodity imports. Analysts noted that foreign banks were particularly active in purchasing dollars during the session, which added further pressure to the rupee's exchange rate.
Future Support And The FCNR(B) Scheme
Despite the current weakness, there is expectation in the market regarding future dollar inflows. The government's new Foreign Currency Non-Resident (Bank), or FCNR(B), deposit scheme, which became operational on June 8, is viewed as a potential source of stability. Reports suggest that this scheme could attract between $3 billion to $4 billion in the near term, with a potential for $50 billion to $80 billion in total inflows over time. These incoming dollars could help increase the supply of foreign currency in the system, potentially supporting the rupee.
What To Watch Next
Investors and market observers will likely monitor two main areas. First, whether the central bank intervenes if the currency faces further rapid depreciation, as experts suggest there may be dollar purchases near the 94 level to limit sharp moves. Second, the actual pace of inflows from the FCNR(B) scheme will be critical. If these inflows materialize as expected, they could provide the necessary cushion to stabilize the currency against global dollar strength.