The Indian Rupee (INR) opened sharply higher against the US Dollar (USD) on Friday, with the USD/INR pair dropping to near 95.25. This movement followed remarks from US President Donald Trump, who stated that he had called off planned military strikes on Iran and that both nations are close to finalizing a permanent peace deal. Trump indicated that the 'final elements of the deal' have been approved by all parties involved and that the time and place for signing would be announced soon. However, Tehran clarified that it has not yet agreed to any document for a memorandum of understanding (MoU) with the US [1].
The announcement led to a broad risk rally, a significant decline in oil prices, and a weaker US Dollar. The MCX Crude Oil contract expiring on June 18 rebounded after a weak opening but remained down 1.62% at around 8,207 from Thursday’s close. Lower oil prices improved the appeal of currencies from oil-importing economies like India [1].
Indian stock markets responded positively, with the Nifty 50 rising almost 250 points to near 23,400 and the Sensex 30 jumping about 1.4% to near 74,800 in opening trade. Despite this, Foreign Institutional Investors (FIIs) continued to be net sellers throughout June, offloading stakes worth Rs. 64,641.43 crore due to ongoing uncertainty over India Inc.’s earnings projections amid Middle East tensions [1].
A Bloomberg report cited in the article suggests that India is preparing for a wider-than-expected fiscal deficit this year, potentially reaching 4.8% of GDP compared to the 4.3% target set in February, as increased energy subsidy costs put pressure on government finances. However, this has not been confirmed by Indian authorities [1].
Looking ahead, investors are awaiting the release of US Consumer Price Index (CPI) data for May and India’s CPI data, which is expected to show an annualized pace of 4%, up from 3.48% in April. The inflation data will influence market expectations for the Reserve Bank of India’s (RBI) monetary policy [1].
CONCLUSION
The Indian Rupee and local equities rallied on optimism over a potential US-Iran peace deal and falling oil prices, though FIIs continued to pare holdings amid earnings uncertainty. Fiscal deficit concerns linger, and upcoming inflation data will be closely watched for further market direction. Overall, the market reaction has been positive, driven by easing geopolitical risks.