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

The Indian rupee ended its two-session winning streak on Tuesday, slipping 2 paise to settle at 94.60 against the US dollar. Despite positive geopolitical developments and falling crude oil prices, domestic currency faced headwinds from persistent foreign capital outflows.

Geopolitical Optimism vs. Capital Outflows

The rupee’s performance on Tuesday was a tug-of-war between global optimism and local equity trends. On one hand, the currency received support from the de-escalation of tensions in West Asia, following a US-Iran peace framework agreement. This deal, which is set to be formally signed in Switzerland by a US delegation led by Vice President JD Vance, has fueled hopes for the reopening of the Strait of Hormuz—a critical global energy shipping route.

On the other hand, these gains were capped by heavy selling in the Indian equity markets. Foreign Institutional Investors (FIIs) remained net sellers, offloading equities worth ₹749.18 crore during the session. While domestic benchmarks like the BSE Sensex rose by 544.15 points to close at 76,808.48, the exodus of foreign capital provided enough downward pressure to pull the rupee slightly lower from its previous close of 94.58.

Impact of Easing Crude Oil Prices

A significant positive for the Indian economy remains the cooling of global oil prices. Brent crude, the global benchmark, traded 1.68% lower 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 crucial buffer for the rupee by reducing the current account deficit.

Amit Pabari, Managing Director of CR Forex Advisors, noted that lower crude prices act as a "favourable wind" for the domestic currency. The expected stability in energy supplies via the Strait of Hormuz further strengthens the outlook for lower volatility in energy-related costs.

Technical Outlook and Predicted Range

Despite the minor setback, market analysts remain cautiously optimistic about the rupee's near-term trajectory. The US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, was marginally lower at 99.61, providing some breathing room for emerging market currencies.

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