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

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

Global Stability and Easing Crude Oil Prices

The global landscape provided significant support for the rupee, primarily driven by de-escalation in West Asia. Optimism surrounding a US-Iran peace framework agreement has led to expectations that the Strait of Hormuz—a critical global energy shipping route—will reopen. This geopolitical shift has directly impacted commodity markets, with Brent crude trading 1.68% lower at $81.77 per barrel.

For an economy like India, which imports nearly 90% of its oil requirements, falling crude prices act as a major tailwind. As Amit Pabari, Managing Director of CR Forex Advisors, noted, lower oil prices function like a "favorable wind" supporting the domestic currency.

FII Outflows Counteract Positive Sentiment

While global factors were largely constructive, the rupee's recovery was capped by domestic market dynamics. Despite Indian equity benchmarks ending higher—with the BSE Sensex rising 544.15 points to 76,808.48 and the NSE Nifty gaining 135.25 points to 23,989.15—foreign institutional investors (FIIs) remained net sellers.

Exchange data revealed that FIIs offloaded equities worth ₹749.18 crore during the session. This continuous outflow of foreign capital exerted downward pressure on the rupee, preventing it from capitalizing on the broader market rally and the marginal dip in the US Dollar Index, which sat at 99.61.

Market Outlook: Range-Bound Movement Ahead

Forex analysts remain cautiously optimistic about the rupee's near-term trajectory, predicting a period of range-bound trading. Market experts suggest that while the currency faces resistance, the overall bias may remain slightly downward toward a stronger rupee.

Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, expects the USD-INR spot price to trade within a range of 94.10 to 94.90. Adding further technical perspective, Dilip Parmar of HDFC Securities noted that the USD-INR may maintain a downward bias with spot levels gravitating toward 94.10, while 95.20 is expected to serve as a significant near-term resistance level.

As the world awaits the formal signing of the peace deal in Switzerland, led by US Vice President JD Vance, global currency and commodity markets are expected to remain highly sensitive to further diplomatic developments.

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