Rupee Strengthened 47 Paise to 92.59 Against US Dollar Amid US-Iran Ceasefire and RBI Rate Decision

Indian Rupee Appreciates Against US Dollar Following Trump's Iran Announcement

The Indian rupee appreciated by 47 paise to close at 92.59 (provisional) against the US dollar on Wednesday, following Donald Trump's announcement of a two-week suspension of military strikes against Iran. The Reserve Bank of India (RBI) also maintained the key benchmark rate unchanged with a neutral stance.

Forex traders reported that investor sentiment received a boost after RBI Governor Sanjay Malhotra assured that the steps taken on forex do not constitute a structural change. Additionally, confidence was exuded in the health of the banking system, despite recent developments in some private banks. Malhotra stated that the banking sector regulator did not come across any governance or conduct-related issues during the supervisory inspection of HDFC Bank.

The interbank foreign exchange market saw the rupee open at 92.92 against the US dollar, then gain ground to touch 92.56 against the US dollar in initial trade, before finally ending the day at 92.59 (provisional) against the greenback. This registered a gain of 47 paise over its previous close.

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Comparison of Rupee's Performance

The Reserve Bank of India kept its key policy rate unchanged on Wednesday, adopting a wait-and-watch stance as policy makers assessed the fallout from the six-week Iran conflict on energy supplies, inflation, and growth. The central bank's six-member Monetary Policy Committee voted unanimously to keep the benchmark repurchase rate at 5.25 per cent, flagging heightened uncertainty after the West Asia conflict drove crude prices sharply higher, weakened the rupee, and disrupted trade flows.

The RBI's policy stance was retained at neutral. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.96 per cent at 98.90.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

The RBI has made projections in a bi-annual Monetary Policy report released on Wednesday. The report expects crude oil prices to average USD 85 per barrel and the rupee to be at 94 against the dollar in FY27.

RBI Projections

Brent crude, the global oil benchmark, was trading lower by 13.73 per cent at USD 94.27 per barrel in futures trade, after the announcement of the ceasefire. President Trump announced a two-week suspension of military strikes against Iran just hours before his Tuesday deadline for the opening of the Strait of Hormuz.

Iran agreed to allow safe navigation through the Strait of Hormuz during the ceasefire, triggering sweeping market moves across oil, equities, and currencies. On the domestic equity market front, Sensex jumped 2,946.32 points to settle at 77,562.90, while the Nifty surged 873.70 points to 23,997.35.

Foreign Institutional Investors offloaded equities worth Rs 8,692.11 crore on Tuesday, according to exchange data.