The rupee extended its recovery over the past week, appreciating about 79 paise, or 0.8 per cent, to close at 94.56 against the dollar on Tuesday. The local currency has now recovered considerably from the record low of 96.96 touched on May 20.

The biggest factor behind the improved sentiment has been the easing of tensions in West Asia. The US and Iran have reached an agreement, raising hopes that the Strait of Hormuz will be fully reopened. As a result, concerns over a prolonged disruption to global oil supplies has moderated, improving sentiment across the financial markets.

The impact was visible in crude oil prices. Brent crude futures, trading around $80 per barrel at the time of writing, declined nearly 7 per cent last week and have fallen over 8 per cent so far this week. For India, a major oil importer, lower crude prices help ease pressure on both the trade balance and inflation, providing support to the rupee.

Foreign flows, too, have shown signs of stabilisation. According to NSDL data, net FPI inflows stood at $421 million over the past week, indicating a pause in the sustained outflows witnessed recently.

Domestic data presented a mixed picture. India’s trade deficit narrowed marginally to $28.21 billion in May from $28.38 billion in April, although it remained significantly higher than $21.88 billion a year ago. Meanwhile, wholesale inflation accelerated to 9.68 per cent in May from 8.26 per cent in April, due largely to higher fuel prices. However, if the current geopolitical calm persists and crude oil prices remain subdued, some of these inflationary pressures could ease in the coming months.

Markets are now turning their attention to this week’s Federal Reserve meeting. While interest rates are widely expected to remain unchanged, investors will closely watch the comments of the new Fed Chairman, Kevin Warsh, for clues on the future path of monetary policy. 

Chart 

The rupee, which had been moving within the 94.90–95.80 range over the past two weeks, broke out on Monday and closed at 94.70. It is currently trading around 94.56 and is approaching a trendline resistance at 94.50.

A decisive break above 94.50 can strengthen the recovery and lift the local currency to 94, with the possibility of an extended rally towards 93.50. However, the path higher may not be smooth as the dollar index (currently at 99.62) continues to retain a mildly bullish bias.

Although the dollar index has moderated in recent sessions, it remains above its 21-day moving average at 99.40. At the same time, it faces notable resistances at 100.15 and 100.50, increasing the likelihood of a sideways movement between 99.40 and 100.15 in the near term.

If the dollar index remains range-bound, the rupee may attempt to extend its recovery beyond 94.50. That said, the key trigger this week will be the outcome of the Federal Reserve meeting, which could have a significant bearing on dollar and, consequently, on rupee.

Outlook 

According to the charts, the rupee is likely to remain range-bound with a positive bias in the near term. However, markets will closely watch the Federal Reserve’s policy decision and commentary for cues on the next move in the dollar-rupee exchange rate.

Published on June 16, 2026