Rupee opens 0.36% higher at 93.64 per US dollar amid signs of de-escalation in US-Iran war

Rupee opens 0.36% higher at 93.64 per US dollar supported by a decline in oil prices after US President Donald Trump suggested discussions about a potential resolution with Iran, despite Tehran's denial of any negotiations maintaining a level of uncertainty.

The 1-month USD/INR fell to a low of 93.35 right after Trump's comments, indicating that the rupee would have surpassed the 93 mark. However, with rising oil prices, reaching the 93 level now seems "unlikely," according to a currency trader at a Mumbai-based bank, as noted in a Reuters report.

Essentially, all markets are reacting to news and focusing on oil, he mentioned, according to the Reuters article. The rupee is at levels that seem "very appealing," but the uncertainty surrounding the situation in Iran dampens confidence significantly.

Heavy outflows from foreign institutional investors continued to put pressure on the local currency, although a strong opening in the domestic stock markets helped mitigate more significant declines, according to forex traders, as per Reuters report. On Monday, foreign institutional investors sold shares worth ₹10,414.23 crore on a net basis, as per exchange data.

"The continuing weakness in the rupee is the main factor behind this sustained selling by FIIs. Therefore, if some sort of stability is to emerge in the market, rupee should stabilize first. IT and pharmaceutical segments are likely to remain resilient assisted by rupee depreciation," said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.

In the interbank foreign exchange market, the local currency began trading at 93.66 against the dollar but later fell to 93.73, reflecting a decrease of 20 paise from the prior closing rate.

Brent crude fell by 11% on Monday following Trump's announcement that he had postponed attacks on Iran's power infrastructure, stating that the US had engaged in constructive discussions with unidentified Iranian officials. US stock markets rose, the dollar weakened, and yields on US Treasury bonds decreased.

Some of these shifts reversed during Asian trading, with Brent recovering almost 4%. Asian stock markets increased, although they were still significantly lower than their peak levels.

Iran's rejection of any negotiations with the US, along with a report from the Wall Street Journal indicating that Saudi Arabia and the UAE are gradually moving towards participating in the conflict against Tehran, undermined the positive sentiment created by Trump's comments.

Rupee outlook

Ponmudi R, CEO of Enrich Money, said that USD/INR is trading above 93.8, continuing its upward trajectory and reflecting sustained pressure on the rupee. The structure remains bullish with higher highs and higher lows. A move above 94.00 can push the pair toward 94.1 and potentially new highs. Immediate support is seen at 92.9–93.2. The rupee is likely to remain under pressure amid strong dollar demand and global uncertainty.

Further, Amit Pabari, MD, Research Team, CR Forex Advisors, said that the market has welcomed the five-day pause, but not with conviction. Any signs of further de-escalation could pull the USD/INR lower. In contrast, further escalation is likely to keep rupee under pressure the direction, for now, will be dictated by how the situation unfolds.

“Technically, 93.80-94.00 now stands as a strong psychological resistance. On the downside, 92.80–93.00 is emerging as a key support zone,” said Pabari.

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