Rupee opens 35 paise higher at 95.34 against US dollar

The Indian rupee opened 35 paise higher at 95.34 against the US dollar on Monday, 25 May, supported by improving risk sentiment amid hopes of a potential resolution to the Iran conflict. Investor confidence also received a boost from recent comments by Reserve Bank of India (RBI) Governor Sanjay Malhotra regarding the domestic currency.

In an interview with Mint, Malhotra said the central bank would do “whatever is required” to ensure orderly movements in the foreign exchange market, adding that the rupee appears undervalued following its recent sharp decline.

His remarks came after two consecutive sessions of strong RBI intervention in the currency market, according to traders. The intervention helped the rupee recover from its record low of nearly 97 per dollar touched last Wednesday.

RBI steps up support for the rupee

The RBI has announced a USD 5 billion buy-sell swap auction for a three-year tenor on 26 May, a move aimed at injecting durable rupee liquidity into the banking system and enhancing its ability to curb excessive currency volatility.

The strategy has proven effective in the past. Earlier this year, when depreciation pressures intensified around the 88-per-dollar level, similar swap operations helped stabilise market sentiment. Likewise, the RBI's USD 5 billion swap auction in December helped pull the rupee back from nearly 91 per dollar to around 89.

These measures have reinforced market participants' confidence that the central bank remains proactive and willing to intervene when necessary to ensure orderly movements in the foreign exchange market.

Improving global sentiment offers relief

Experts believe the rupee also received support from easing global risk concerns after reports indicated that the United States and Iran are moving toward a potential agreement. The development triggered a sharp decline in Brent crude prices, which fell nearly 5% to $ 98 per barrel, reducing immediate pressure on oil-importing economies such as India.

According to reports, discussions have centred on reopening the Strait of Hormuz, reducing regional hostilities, and advancing nuclear-related negotiations. However, US President Donald Trump said the US would maintain its blockade of the Strait until a formal agreement is reached and indicated that he would not rush into a deal.

Hormuz reopening could be a major positive for India

According to experts, a full reopening of the Strait of Hormuz would be a significant positive for India, as the vital shipping route handles nearly one-fifth of global oil and LNG trade. Lower crude oil prices would help reduce India's import bill, improve external balances, and provide additional support to the rupee.

Rupee Outlook

Amit Pabari, MD, Research Team, CR Forex Advisors, said from a technical perspective, the 96.20–96.40 zone is expected to act as a strong resistance area for USDINR.

“If crude oil prices remain contained and global risk sentiment continues to improve, there is a strong possibility that the rupee may gradually appreciate toward the 94.80–94.50 zone in the near term,” said Pabari.

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