The Indian rupee experienced significant volatility on Tuesday, briefly touching a two-month low against the US dollar before recovering to close nearly flat. The currency's movements were largely influenced by elevated crude oil prices and broader global economic indicators.
Rupee's Volatile Day
Provisional data indicates the rupee settled at 95.98 per US dollar, reflecting a marginal dip of 1 paisa from its previous close. Earlier in the day, the Indian currency had slipped past the critical 96 mark, marking its lowest point in two months.
Analysts attributed the initial depreciation primarily to persistently high crude oil prices, which significantly impact India's external balance due to the nation's heavy reliance on imported oil. Strong global bond yields and the strengthening US dollar also contributed to the pressure on currency markets.
Expert Insights on Recovery and Outlook
Dilip Parmar, a Research Analyst at HDFC Securities, noted the rupee's resilience after its initial dip.
"The Indian Rupee started the day under pressure, cracking below 96 level before clawing back some lost ground. Swift RBI action, a pullback in global crude, and equity index rebalancing-driven foreign inflows stepped in to restore stability," Parmar stated. He added, "Looking ahead, the pair's direction will remain heavily influenced by what happens with oil and broader global risk dynamics."
Parmar also provided a technical outlook, identifying resistance for spot USD-INR at 96.30 and support at 95.80.
Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities, highlighted the role of crude oil in the rupee's stabilization.
"Rupee traded largely flat, as crude prices saw some profit booking from recent highs. With the rupee appearing oversold near the 96.00 level, any major positive domestic or global cues could support a recovery," Trivedi explained. He projected the rupee's trading range to be between 95.65 and 96.15.
At the close of trading, Brent crude futures were down 0.94 percent, priced at $104.29 a barrel, after reaching above $108 a barrel on Monday, providing some relief to the currency market.