Rupee Gains 35 Paise to Reach 95.34 Against US Dollar

Indian Rupee Rebounds Against US Dollar Amid Hopes of Iran Conflict Resolution

The Indian rupee opened 35 paise higher at 95.34 against the US dollar on Monday, 25 May, as improving risk sentiment and comments from the Reserve Bank of India (RBI) Governor Sanjay Malhotra boosted investor confidence. Malhotra's remarks regarding the domestic currency's undervaluation following its recent sharp decline have helped to alleviate concerns about the rupee's stability.

The RBI's intervention in the currency market over the past two sessions has also contributed to the rupee's recovery from its record low of nearly 97 per dollar touched last Wednesday. To further support the rupee, the RBI has announced a USD 5 billion buy-sell swap auction for a three-year tenor on 26 May. This move is aimed at injecting durable rupee liquidity into the banking system and enhancing its ability to curb excessive currency volatility.

The RBI's 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. Similarly, the RBI's USD 5 billion swap auction in December helped pull the rupee back from nearly 91 per dollar to around 89.

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The RBI's proactive approach has reinforced market participants' confidence that the central bank remains willing to intervene when necessary to ensure orderly movements in the foreign exchange market. Additionally, easing global risk concerns after reports indicated that the United States and Iran are moving toward a potential agreement have also supported the rupee.

Experts believe that the rupee's recovery is partly due to the sharp decline in Brent crude prices, which fell nearly 5% to $98 per barrel. This reduction in crude oil prices has alleviated pressure on oil-importing economies such as India. A full reopening of the Strait of Hormuz, which handles nearly one-fifth of global oil and LNG trade, would be a significant positive for India, as lower crude oil prices would help reduce India's import bill, improve external balances, and provide additional support to the rupee.

From a technical perspective, Amit Pabari, MD, Research Team, CR Forex Advisors, expects the 96.20–96.40 zone 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.

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