Rupee Rises 15 Paise To 95.81 As Oil Prices Ease, US-Iran Talks Lift Sentiment

The Indian rupee strengthened 15 paise to close at 95.81 against the US dollar on Monday, helped by softer crude oil prices, improved global risk sentiment and gains in domestic equities. Hopes of diplomatic engagement between the US and Iran also provided some relief to markets worried about prolonged geopolitical tensions.

The rupee opened at 95.86 and moved to an intraday high of 95.72 before settling at 95.81 on a provisional basis. It had closed at 95.96 on Friday.

The biggest support came from crude oil. Brent, the global benchmark, was trading about 2.08 per cent lower at $101.71 a barrel in futures trade. Lower oil prices are particularly important for India because the country imports a large share of its crude requirement, making the rupee sensitive to changes in the global oil bill.

Market sentiment was also helped by expectations of possible diplomatic moves involving Washington and Tehran. However, the geopolitical picture remained fragile. Reports of an Iranian attack involving a US drone in the Strait of Hormuz could quickly reverse the improvement in risk sentiment, keeping oil and currency markets vulnerable to fresh shocks.

Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said the rupee could retain a slight positive bias if crude remains under pressure, while expectations of higher Saudi oil supplies could provide further support. He placed the near-term USD-INR range at 95.55-96.05.

Domestic equities added to the positive mood. The Sensex jumped 564.03 points to 74,858.99, while the Nifty gained 67.90 points to 23,414.30. Foreign investors had also turned buyers on Friday, purchasing equities worth Rs 599.54 crore on a net basis.

However, the currency's modest recovery comes against a backdrop of fluctuating foreign-exchange reserves. India's reserves fell $4.924 billion to $780.782 billion in the week ended September 11, after touching a record $785.706 billion the previous week. The latest decline was largely due to lower foreign-currency assets and gold reserves.

The rupee's immediate direction will therefore remain closely linked to crude prices, foreign fund flows, US interest-rate expectations and developments in the Middle East.