Rupee opens marginally weaker at 94.57 against US dollar

The Indian rupee opened marginally weaker at 94.57 against the US dollar on Tuesday, 30 June, tracking losses in other Asian currencies, while traders said persistent underlying demand for dollars continues to limit the currency's near-term gains.

The rupee has staged a recovery from its record low of around 97 per dollar touched in mid-last month, supported by a sharp decline in crude oil prices and measures taken by the Reserve Bank of India to stabilise the currency. However, it has largely remained range-bound in recent sessions.

Market participants said the rupee has repeatedly failed to sustain gains beyond the 94.00-94.20 zone despite periodic short-covering in the currency. A stronger US dollar has capped further appreciation, while continued importer hedging and subdued foreign equity inflows have kept demand for the greenback elevated.

On Monday, the rupee strengthened to an intraday high of 94.25 before paring its gains by the close.

FPI caution weighs on the Rupee

The Nifty 50 declined around 0.4%, underperforming several of its regional peers as foreign investors remained cautious on Indian equities. Persistent FPI outflows typically add pressure on the rupee by increasing demand for the US dollar, underscoring the close relationship between capital flows and currency movements.

West Asia tensions shift towards diplomacy

Global markets closely tracked developments in West Asia over the weekend after the United States and Iran exchanged fresh military strikes before agreeing to halt attacks and resume diplomatic talks in Qatar, according to experts.

While the ceasefire has eased immediate concerns, investors remain cautious as the situation continues to evolve. Any renewed escalation could once again disrupt global risk sentiment and commodity markets.

Crude Oil holds near $73 a barrel

Brent crude traded near $73 per barrel, with the sharp geopolitical risk premium seen earlier largely fading as markets shifted their focus to renewed US-Iran negotiations.

However, conflicting signals from both sides have kept traders on edge, preventing oil markets from fully pricing in a lasting resolution to the conflict.

Strong domestic data support sentiment

On the domestic front, India's latest macroeconomic data supported market sentiment.

Industrial production (IIP) expanded 5.1% in May, beating market expectations and improving from the previous month's reading. Manufacturing output also remained robust, growing 5.5%, signalling continued resilience in economic activity despite an uncertain global backdrop.

The stronger-than-expected data reinforces confidence in India's growth outlook and provides a supportive backdrop for the rupee over the medium term.

Rupee Outlook

Amit Pabari, MD, CR Forex Advisors, said that technically, 94.00–94.30 remains a strong support zone for USDINR. The pair has repeatedly tested this area over the past week but has been unable to break lower, indicating strong dollar demand and possible RBI buying interest.

The longer USDINR holds above this support, the stronger the case for a move toward 95.30–95.50 in the coming sessions.

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