The Indian rupee strengthened to around 94.9 per US dollar, rebounding sharply to an eight-week high, as sustained intervention by the Reserve Bank of India (RBI) and favourable short-term momentum offset headwinds from elevated US Treasury yields and higher crude oil prices. The currency also benefited from flow-driven dollar selling, while India’s GDP grew 7.8% year-on-year in the June quarter of 2026, beating market expectations.
Still, further gains in the rupee may be capped, with importers expected to step up hedging at current levels and the RBI’s FX forward book climbing to a record $137 billion in July. At the same time, the 10-year US Treasury yield rose to 4.778%, its highest level since January 2025, and Brent crude advanced to around $91.14 per barrel as renewed US–Iran tensions stoked inflation worries.
On the fiscal front, traders also weighed India’s budget dynamics. The central government’s fiscal deficit narrowed to INR 4.6 trillion in April–July from INR 4.7 trillion a year earlier, equivalent to 26.8% of the full-year target, down from 29.9% in the same period previously.
