Rupee Strengthens 40 Paise As Crude, Dollar Fall On US-Iran Peace Deal

inflation outlook and external balances. The Dollar Index fell to 99.48 level taking the rupee to a four-month high.

A stronger rupee improves inflation outlook and boosts external-sector stability.

Traders said that oil companies bought dollars for importing oil. The 10-year yield cooled to 6.86 per cent down from 7.15 per cent seen in the current year.

At the interbank foreign exchange market, the rupee opened at 94.68 against the dollar. Intraday it strengthened 62 paise to 94.45 before closing at 94.71 against the US dollar compared to its previous close of 95.11, a rise of 40 paise.

“As 94.50 gets broken, we can expect the rupee to move to 94 levels with RBI also present to buy dollars to cut its short positions as also to increase its reserves. The range for tomorrow is expected
between 94 to 95 subject to no change in the terms and conditions of the proposed deal between US and Iran and no violation of the ceasefire agreement,” said Anil Bhansali, head treasury at Finrex
Trading Advisors.

According to Emkay Global, while the current account would see pressure from higher oil prices (vs FY26), the government and RBI measures to attract capital flows should help address the Balance of
Payment (BoP) deficit. It expects $ 70-75 billion in capital flows from these measures which could help FY27 BoP move to near-zero deficit or even a minor surplus. Potential inclusion of Indian
sovereign bonds in global bond indices could bring in further large passive FPI debt inflows of USD20-25bn; however, these are likely to materialize only in FY28.

Additionally, this should help the rupee appreciate toward 93 in the near term (by end-2QFY27), as these flows materialize. However, RBI’s heavy net short forward book of around $ 95 billion, with $45 billion maturing by end-FY27 may put depreciation pressure on the currency beyond 2QFY27, said Emkay.