The rupee pared initial gains and settled for the day on a negative note, lower by 18 paise at 95.34 (provisional) against the U.S. dollar on Thursday (July 2, 2026), as the support from easing crude oil prices was negated by robust dollar demand from importers and corporate hedgers.

Forex traders said the Indian rupee opened higher on an overnight decline in the U.S. dollar following less hawkish comments from Fed Chair Kevin Warsh and a fall in crude oil prices. However, the rupee lost its initial gains on FII outflows and dollar demand from hedgers.

At the interbank foreign exchange market, the rupee opened at 94.95 against the American currency and traded in a range of 94.90-95.40 during the session.

The rupee finally closed at 95.34 (provisional), registering a decline of 18 paise from its previous close.

On Wednesday (July 1, 2026), the rupee depreciated 60 paise to close at 95.16 against the U.S. dollar.

“We expect the rupee to trade with a negative bias on uncertainty over the U.S. and Iran deal despite positive comments from U.S. President Donald Trump. However, any softening of the U.S. dollar on less hawkish comments from the Fed may support the rupee at lower levels,” said Anuj Choudhary, Research Analyst, Mirae Asset ShareKhan.

“Declining crude oil prices may also support the rupee at lower levels. Traders may take cues from weekly employment claims and the non-farm payrolls report from the U.S. The USD-INR spot price is expected to trade in a range of 95.00 to 95.60,” said Mr. Choudhary.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 101.00, lower by 0.38%.

Meanwhile, Brent crude, the global oil benchmark, was trading lower by 1.43% at $70.55 per barrel in futures trade.

While a decline in global crude oil prices and RBI interventions propped up the local unit, the rupee is likely to stay under pressure amid continued geopolitical uncertainty and significant foreign fund outflows.

Foreign investors extended their selling spree in June, withdrawing ₹49,340 crore ($5.16 billion) from Indian equities, triggered by a combination of early-month global risk aversion, a preference for developed markets, soaring U.S. bond yields, and stretched valuations in the domestic market.

According to data from the Central Depository Services (India) Ltd, the total withdrawals by Foreign Portfolio Investors (FPIs) from Indian equities have surged to ₹2.7 lakh crore so far in 2026, surpassing the ₹1.66 lakh crore pulled out during the entire calendar year 2025.

On the domestic equity market front, Sensex jumped 579.48 points to settle at 77,502.12, while the Nifty surged 169.85 points to 24,175.70.

Foreign institutional investors sold equities worth ₹1,140.50 crore on a net basis on Wednesday (July 1, 2026), according to exchange data.

Foreign investors extended their selling spree in June, withdrawing ₹49,340 crore ($5.16 billion) from Indian equities, triggered by a combination of early-month global risk aversion, a preference for developed markets, soaring U.S. bond yields, and stretched valuations in the domestic market.

With the latest outflows, total withdrawals by Foreign Portfolio Investors (FPIs) from Indian equities have surged to ₹2.7 lakh crore so far in 2026, surpassing the ₹1.66 lakh crore pulled out during the entire calendar year 2025, according to data from the Central Depository Services (India) Ltd.

According to the data, FPIs remained net sellers in every month of 2026 except February. They withdrew ₹35,962 crore in January before turning net buyers in February, investing ₹22,615 crore, marking the highest monthly inflow in 17 months.

The trend, however, reversed sharply in March, when foreign investors pulled out a record ₹1.17 lakh crore. The selling pressure continued in April with net outflows of ₹60,847 crore and in May with withdrawals of ₹32,963 crore. In June, FPIs withdrew ₹49,340 crore.

Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India, said the outflow during the month was largely driven by “global risk aversion in the first half of June, continued preference for developed markets, higher U.S. yields, and valuation concerns around Indian equities”.

However, geopolitical risks eased in the second half of June following the positive developments around the peace deal between the U.S. and Iran, which helped calm global markets and led to a correction in crude oil prices. This improved risk sentiment and reduced concerns about energy-price shocks, he added.

As a result, the pace of FPI selling moderated later in the month, although it was not enough to offset the sizeable outflows recorded earlier.

V.K. Vijayakumar, Chief Investment Strategist atGeojit Investments, attributed two factors to the moderation in FPI activity — stabilisation and appreciation of the rupee against the dollar, and heavy FPI profit-booking amid high volatility in the South Korean and Taiwanese markets.

Given the importance of foreign portfolio flows in financing the current account deficit and supporting the balance of payments, policymakers announced a series of measures in June aimed at attracting overseas capital.

These include the RBI absorbing hedging costs on FCNR deposits mobilised by commercial banks, expanding the forex swap window, increasing access to government bonds through the Fully Accessible Route (FAR), and raising investment limits for non-resident Indians and overseas citizens of India in domestic equities.

In contrast to the equity outflows, FPIs invested ₹21,652 crore in debt securities through the FAR route during June and ₹3,246 crore through the voluntary retention route.