The Indian rupee opened 10 paise stronger at 94.46 against the US dollar on Wednesday, supported by a further decline in crude oil prices. However, gains in the domestic currency may remain limited amid weakness across Asian currencies and investor caution ahead of the US Federal Reserve’s policy decision.
Brent crude oil prices plunged nearly 5% on Tuesday, falling below $80 per barrel, extending losses to around 15% over the past four sessions. The sharp correction has brought oil prices close to pre-conflict levels, providing relief to energy-importing economies such as India.
The decline followed fresh developments in the ongoing US-Iran negotiations. Details of an interim peace agreement began to emerge on Tuesday, with US President Donald Trump stating that the deal would prevent Iran from developing nuclear weapons. A US official also indicated that the agreement would allow Iran to resume oil exports once signed, raising expectations of improved global oil supplies.
While lower crude prices have boosted optimism about the normalisation of energy flows, analysts have urged caution, noting that geopolitical uncertainties remain, according to a Reuters report.
The rupee has appreciated about 1.2% over the last six trading sessions, largely aided by the decline in oil prices. However, the currency has struggled to sustain gains beyond the 94.50 level, which traders view as a key resistance zone.
Market participants said the rupee’s upside could remain capped on Wednesday as most Asian currencies weakened ahead of the Federal Reserve’s first monetary policy decision under Chair Kevin Warsh. While the Fed is widely expected to leave interest rates unchanged, investors will closely monitor its policy statement, economic projections and press conference for clues on the future interest-rate trajectory.
According to market experts, foreign portfolio investor (FPI) outflows are showing clear signs of moderation, offering support to the rupee and broader financial markets. After hitting a record high of $12.58 billion in March, FPI outflows declined to $7.09 billion in April and eased further to $2.94 billion in May. Analysts believe recent measures announced by the Reserve Bank of India (RBI) could help stabilise capital flows further in the coming months.
Experts also pointed to the sharp decline in crude oil prices as a major positive for the Indian currency. Brent crude has slipped to around $79 per barrel, its lowest level in nearly three months, as markets factor in the potential reopening of the Strait of Hormuz following the US-Iran peace framework. Lower oil prices directly reduce India’s import bill and ease demand for dollars, providing structural support to the rupee.
Meanwhile, analysts said the US Federal Reserve remains the key near-term variable for global currency markets. The Federal Open Market Committee’s (FOMC) policy decision is due later today, followed by the first press conference by Fed Chair Kevin Warsh. While interest rates are widely expected to remain unchanged, investors will closely watch the Fed’s updated economic projections and policy guidance.
Rupee Outlook
According to Amit Pabari, MD, Research Team, CR Forex Advisors, the rupee’s bias has shifted. On the upside, 95.00-95.30 is now a strong resistance zone for USDINR. With expectations of strong foreign capital inflows and USDINR having decisively broken below the 94.80 level, the pair could gradually move towards the 94.00–93.80 zone in the coming days.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
