The Indian rupee strengthened by 13 paise to close at 95.81 against the US dollar on Wednesday, supported by lower global crude oil prices. However, persistent foreign institutional investor selling and weak domestic equity market sentiment limited further gains.
The Indian rupee closed at 95.81 against the US dollar on Wednesday, marking a modest gain of 13 paise. This recovery comes as global crude oil prices cooled to $103.18 per barrel and the US Dollar index softened to 101.23. Since India is a major importer of crude oil, lower prices typically reduce the demand for foreign currency, which provides a natural support to the rupee.
The Reserve Bank of India continues to play a significant role in managing this volatility. State-run banks, acting on behalf of the central bank, were observed selling dollars in both spot and forward markets to prevent the currency from sliding past the psychologically important 96.00 level.
Despite the recovery, the currency faces pressure from sustained foreign institutional investor (FII) outflows. Foreign investors have pulled out approximately ₹9,980.22 crore from the Indian equity market in recent sessions, pushing the total monthly outflow to roughly $2.2 billion. This continuous selling pressure has acted as a drag on the rupee, keeping its appreciation limited even when global factors were supportive.
The broader domestic market sentiment remains cautious, reflecting the pressure on the currency. Both the S&P BSE Sensex and Nifty 50 traded lower, closing at 72,480.29 and 22,620.45 respectively. This trend is driven by wider concerns over geopolitical tensions and uncertainties regarding US-Iran diplomatic relations.
For investors and traders, the next major triggers will be upcoming US economic data, including the ADP non-farm employment figures and the core PCE price index. These reports are expected to influence US interest rate expectations, which in turn will dictate the direction of the US dollar and the rupee in the near term.