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

The Indian rupee ended its recent winning streak on Tuesday, sliding 2 paise to settle at 94.60 against the US dollar. Despite positive global developments in energy markets and West Asian geopolitics, domestic capital outflows prevented the currency from maintaining its upward momentum.

Factors Countering the Rupee's Momentum

After gaining 67 paise on Friday and 60 paise on Monday, the rupee's recovery was halted during Tuesday's interbank foreign exchange market session. The currency opened at 94.69 and fluctuated within a range of 94.48 to 94.71 before settling slightly lower than its previous close of 94.58.

A primary drag on the rupee was the persistent selling pressure from Foreign Institutional Investors (FIIs) in the Indian equity markets. Although domestic benchmarks saw gains—with 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—FIIs remained net sellers, offloading equities worth ₹749.18 crore. This outflow of foreign capital capped any potential gains for the domestic currency.

Despite the marginal dip, the global outlook provided a supportive backdrop for the rupee. Tensions in West Asia have begun to de-escalate following a US-Iran peace framework agreement. US President Donald Trump recently announced that Vice President JD Vance will lead the American delegation to Switzerland this Friday for the formal signing of the deal.

This geopolitical shift is expected to lead to the reopening of the Strait of Hormuz, a critical global energy shipping route. Consequently, Brent crude, the global oil benchmark, saw a decline of 1.68 per cent, trading at $81.77 per barrel. For an economy like India, which imports nearly 90 per cent of its oil requirements, lower crude prices act as a significant tailwind for the rupee by easing the current account deficit.

Market Outlook and Projected Ranges

Currency analysts remain cautiously optimistic about the rupee's near-term trajectory, predicting a period of range-bound movement. The dollar index, which measures the greenback against a basket of six major currencies, showed slight weakness, trading at 99.61.

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