Rupee Hits 94.56 as Oil Drop and Inflows Shift the Bias

The rupee closed up 0.2% at 94.56 against the dollar on Tuesday, its third straight gain. The local unit opened at 94.6125 and traded within a 10-paisa range around Friday's close. An intraday high of 94.4950 was met by importer hedging interest, capping the upside, traders said.

The move was driven by two forces, traders said: softer oil prices after the U.S.–Iran preliminary peace deal, and foreign inflows from recent central bank measures. The agreement, announced Monday by President Donald Trump, would reopen the Strait of Hormuz, a chokepoint for roughly one-fifth of global oil and LNG supplies. Brent crude slipped below $81.50 a barrel on the news.

For India, the world's third-largest oil importer, lower crude prices reduce the import bill and ease dollar demand from oil-marketing companies. That dynamic, combined with the central bank's steps to attract foreign capital, has shifted the rupee's bias, said Mandar Pitale, head of treasury at SBM Bank (India). He expects the rupee to appreciate toward 94 in the near term before consolidating. The 94.50 level has acted as resistance, and a close above that could open the door to 94, he added. The central bank's recent measures to attract foreign capital, including easing bond investment rules, have boosted inflows, traders said.

The Fed's policy decision, due after Indian markets close Wednesday, is the next catalyst. The central bank is widely expected to hold rates steady. Its updated guidance will be parsed for signals on the U.S. rate path. A hawkish tone could strengthen the dollar and test the rupee's recent gains, while a dovish lean would reinforce the bullish bias, traders said. The dot plot and Chair Powell's press conference will be the main focus.

A permanent truce between Washington and Tehran is yet to be negotiated. The preliminary agreement's full details are also pending, including the timeline for reopening the Strait of Hormuz.