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

The Indian rupee ended its recent winning streak on Tuesday, closing 2 paise lower at 94.60 against the US dollar. Despite positive global developments and falling crude oil prices, domestic currency pressures prevented a further rebound.

Market Volatility and Daily Range

The rupee faced a session of fluctuations in the interbank foreign exchange market. After opening at 94.69 against the greenback, the domestic currency traded within a range of 94.48 to 94.71 before settling at 94.60. This move follows a period of significant strength, where the rupee had gained 67 paise on Friday and 60 paise on Monday, marking a robust recovery in the preceding two sessions.

Global Tailwinds: Oil Prices and West Asian Diplomacy

Several geopolitical factors provided a cushion for the rupee, preventing a deeper slide. A major driver was the easing of Brent crude prices, which fell 1.68% to trade at $81.77 per barrel in futures trade. For India, which relies on imports for nearly 90% of its oil requirements, lower crude prices act as a significant stabilizer for the currency.

This decline in energy costs is linked to the US-Iran peace framework agreement. With US Vice President JD Vance expected to lead the American delegation for the formal signing of the deal in Switzerland this Friday, markets are optimistic about the reopening of the Strait of Hormuz. This strategic shipping route is vital for global oil and liquefied natural gas (LNG) exports, and its stability is viewed as a positive for global commodity markets.

FII Outflows Cap Domestic Gains

While global sentiment remained constructive, domestic equity market activity acted as a headwind. Despite the BSE Sensex rising 544.15 points to 76,808.48 and the NSE Nifty gaining 135.25 points to close at 23,989.15, foreign institutional investors (FIIs) remained net sellers. FIIs offloaded equities worth ₹749.18 crore during the session, a move that exerted downward pressure on the rupee and limited its ability to sustain the recent rally.

Expert Outlook: Near-Term Support and Resistance

Market analysts remain cautiously optimistic about the rupee's trajectory. Experts suggest that the USD-INR spot price is likely to trade within a specific corridor in the near term. Anuj Choudhary of Mirae Asset ShareKhan anticipates a trading range between 94.10 and 94.90.

Furthermore, Dilip Parmar from HDFC Securities expects the USD-INR to maintain a downward bias, with spot levels potentially gravitating toward the 94.10 mark. However, he noted that 95.20 is expected to serve as a significant resistance level, which may cap any intermittent corrective rallies.

Key Takeaways