Rupee logs sharpest gain in a month as crude falls post Iran-Israel truce

Business Standard

5 hours ago

The rupee appreciated sharply against the US dollar, recording its highest single-day gain in a month, buoyed by falling crude oil prices and a weakening dollar after the ceasefire between Israel and Iran took effect, dealers said.
The local currency strengthened beyond the 86-per-dollar mark to settle at 85.97 per dollar on Tuesday, compared with the previous close of 86.75.
The rupee appreciated by 0.91 per cent during the day, marking its second-largest single-day gain in the current calendar year after a 0.93 per cent rise on May 23.
'The pressure was off the rupee as crude fell below $70 per barrel and the dollar index was down,' said the treasury head at a private bank. 'The bearish positions against the rupee were cut on the news of the ceasefire,' he added.
Meanwhile, domestic equity markets rallied over 1.3 per cent after US President Donald Trump announced that Iran and Israel had committed to a ceasefire. However, markets gave up most of their gains after Israel accused Tehran of violating the agreement.
After hitting a high of 83,018, the Sensex ended at 82,055, with a gain of 158 points, or 0.2 per cent. The Nifty closed at 25,044, up 72.5 points, or 0.3 per cent. The index had touched 25,318 in intraday trade—its highest level in nearly nine months.
The rupee has depreciated by 0.5 per cent against the dollar in the current financial year and by 0.4 per cent in the calendar year so far.
Brent crude oil prices declined by more than 15 per cent to $69 per barrel on Tuesday. Meanwhile, the dollar index fell by 0.2 per cent to 98. The index measures the strength of the greenback against a basket of six major currencies.
Market participants said the rupee is expected to trade with an appreciation bias, with strong resistance seen near 85.80 per dollar.
'The pair is testing a key resistance around 86.70 per dollar. If it moves above this level, it could rise toward 87.20. But if it fails to break higher and falls below 85.80, it may signal a reversal. For now, the trend remains positive as long as support holds,' said Ritesh Bhansali, vice-president, Mecklai Financial Services.
The country's foreign exchange reserves, at $699 billion, act as a cushion for the Indian unit. The reserves are slightly below the all-time high of $705 billion attained in September 2024.
'As oil prices fall, the rupee can be expected to move to 85.50. We have a lot of flows this week, apart from HDB Financial Services—such as FTSE rebalancing flows and SBI's Rs 25,000 crore QIP,' said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors.
Traders are now eyeing US Federal Reserve Chair Jerome Powell's testimony before US lawmakers on Tuesday and Wednesday. US Federal Reserve vice-chair Michelle Bowman on Monday signalled support for a potential rate cut in July if inflation remains subdued, prompting markets to price in around 55 basis points of easing by year-end.