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

The Indian rupee faced a minor setback on Tuesday, breaking a two-session winning streak to settle 2 paise lower at 94.60 against the US dollar. Despite favorable global developments in energy markets and West Asian geopolitics, domestic capital outflows prevented the currency from maintaining its upward momentum.

Geopolitical Optimism vs. Domestic Capital Outflows

The rupee's performance on Tuesday was a tug-of-war between positive global signals and cautious domestic sentiment. In the interbank foreign exchange market, the currency opened at 94.69 and fluctuated between 94.48 and 94.71 before closing at 94.60, compared to the previous close of 94.58.

While forex traders noted that the de-escalation of tensions in West Asia and the potential reopening of the Strait of Hormuz provided a strong support floor for the rupee, these gains were capped by significant foreign capital outflows. Foreign Institutional Investors (FIIs) remained net sellers in the Indian equity markets, offloading shares worth ₹749.18 crore during the session. This selling pressure in the domestic equity space acted as a drag on the currency’s recovery.

Crude Oil Prices and the US-Iran Peace Framework

A major driver for the rupee's recent strength has been the easing of global crude oil prices. Brent crude, the global oil benchmark, saw a decline of 1.68 per cent, trading at $81.77 per barrel in futures trade.

For an economy like India, which relies on imports for nearly 90 per cent of its oil requirements, lower crude prices act as a vital tailwind for the rupee. This price correction follows optimism surrounding a US-Iran peace framework agreement. With US President Donald Trump announcing that Vice President JD Vance will lead the American delegation for the formal signing of this deal in Switzerland this Friday, markets are anticipating the reopening of the Strait of Hormuz—a critical global energy shipping route.

Market Outlook: Expected Ranges for USD-INR

Despite the minor dip, market analysts remain generally constructive regarding the rupee's near-term trajectory. While the currency faced resistance, experts suggest that the broader trend remains influenced by global commodity shifts and US dollar movements.

Research analysts provided the following projections for the USD-INR pair:

Meanwhile, the Dollar Index, which tracks the US currency against a basket of six major global currencies, remained marginally lower at 99.61, providing some relief to emerging market currencies.

Key Takeaways