The Indian rupee appreciated by 20 paise to 95.41 against the US dollar in early trade on Tuesday, buoyed by positive global developments. Forex traders attributed the uptick to the de-escalation of tensions between Israel and Iran, which eased geopolitical concerns and improved investor sentiment.
Rupee Opens Stronger
At the interbank foreign exchange market, the rupee opened at 95.41 against the greenback, marking a gain of 20 paise from its previous close of 95.61. The local unit moved in a tight range in early deals, reflecting cautious optimism among market participants.
Factors Behind the Rise
According to forex analysts, the rupee's strength was primarily driven by the agreement between Israel and Iran to de-escalate and ease strikes. This development reduced the risk premium associated with the region, leading to a rally in emerging market currencies. Additionally, a positive trend in domestic equities and sustained foreign fund inflows provided further support to the rupee.
Market Outlook
While the rupee gained ground, traders remained watchful of global crude oil prices and the US dollar's movement against major currencies. The Reserve Bank of India's (RBI) intervention in the forex market also played a role in stabilizing the rupee. Analysts expect the rupee to trade in a range of 95.20 to 95.60 in the near term, with any further escalation in geopolitical tensions likely to trigger volatility.
The rupee's recovery comes after a period of depreciation, as the domestic currency had hit a record low of 96.10 earlier this month. The ongoing trade deficit and inflationary pressures continue to pose challenges, but the latest geopolitical easing has provided a temporary breather.
Expert Comments
"The de-escalation between Israel and Iran is a positive signal for global markets, and the rupee is benefiting from this risk-on sentiment. However, the overall trend will depend on how the situation evolves and the trajectory of the US dollar," said a senior forex dealer at a public sector bank.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.1% lower at 104.50, adding to the rupee's gains.
