Rupee Ends Two-Day Rally to Settle at 94.60 Against US Dollar

The Indian rupee snapped a recent winning streak on Tuesday, closing slightly lower at 94.60 against the US dollar. Despite favorable global developments and easing crude oil prices, domestic capital outflows prevented the currency from maintaining its upward momentum.

Market Volatility and Settlement Details

After two consecutive days of significant gains—including a 67-paise jump on Friday and a 60-paise rise on Monday—the rupee faced a minor setback. In the interbank foreign exchange market, the currency opened at 94.69 against the greenback and fluctuated within a range of 94.48 to 94.71. It eventually settled at 94.60, a marginal decrease of 2 paise from the previous close of 94.58.

While the Dollar Index showed slight weakness at 99.61, the rupee's recovery was largely capped by domestic equity trends.

The Impact of Geopolitics and Crude Oil Prices

Global geopolitical shifts played a dual role in the currency's performance. Optimism surrounding a US-Iran peace framework agreement has provided a supportive backdrop for the rupee. This agreement, which is expected to be formally signed in Switzerland this Friday with Vice President JD Vance leading the American delegation, has signaled a potential reopening of the Strait of Hormuz.

As a critical global energy shipping route, the stability of the Strait is vital for oil and liquefied natural gas exports. Consequently, Brent crude futures saw a decline of 1.68 per cent, trading at $81.77 per barrel. For an economy like India, which relies on imports for nearly 90 per cent of its oil requirements, these lower prices act as a significant tailwind for the domestic currency.

Foreign Institutional Outflows Counteract Gains

The primary headwind for the rupee remains the stance of Foreign Institutional Investors (FIIs) in the Indian equity markets. Although domestic benchmarks performed well—with the BSE Sensex climbing 544.15 points to 76,808.48 and the NSE Nifty rising 135.25 points to 23,989.15—FIIs remained net sellers. Exchange data revealed that foreign investors offloaded equities worth ₹749.18 crore during the session, putting downward pressure on the rupee.

Expert Outlook and Resistance Levels

Despite the slight dip, market analysts maintain a constructive view of the rupee's near-term trajectory. Analysts suggest that the USD-INR spot price is likely to trade within a range of 94.10 to 94.90.

Some experts, including research analysts from HDFC Securities, anticipate a downward bias for the USD-INR pair, with potential movement toward the 94.10 level. However, they also cautioned that 95.20 could act as a critical resistance level, limiting any significant corrective moves toward the upside.

Key Takeaways