The Indian Rupee opened flat on Wednesday, following a pause in its two-day winning streak, as weakness in the U.S. dollar index helped limit sharper losses. The domestic currency dipped marginally by 1 paise to start the day at 85.65 per U.S. dollar, compared to Tuesday’s close of 85.64, as per Bloomberg data. So far this month, the rupee has slipped over 1.3%.
On Tuesday, the rupee weakened as oil companies ramped up dollar purchases and foreign investors sold off equities. According to Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, the selloff by foreign portfolio investors (FPIs) added to the pressure. FPIs offloaded over ₹10,000 crore in the cash segment — the highest single-day outflow in over three months.
Dollar Index Slides Below 100, Lifts Asian Currencies
Meanwhile, the U.S. Dollar Index retreated below the psychological 100 mark, trading 0.44% lower at 99.67. This drop, which measures the dollar’s strength against a basket of six major currencies, provided support to Asian currencies that gained between 0.1% and 0.4%.
The index declined following cautious commentary from Federal Reserve officials. St. Louis Fed President Alberto Musalem warned of a potential weakening in the U.S. labor market and renewed inflationary risks, concerns that were echoed by Atlanta Fed President Raphael Bostic. Despite the dovish tone, the 10-year U.S. Treasury yield edged higher, touching the 4.50% level, while shorter-term yields remained largely unchanged.
Geopolitical Tensions Push Oil Prices Higher
Adding to the rupee’s headwinds, crude oil prices firmed up amid rising geopolitical tensions. Reports indicated Israel is preparing for a possible strike on Iranian nuclear facilities, stoking fears of regional instability. In response, Brent crude rose 1.48% to $66.35 per barrel, while WTI was slightly down by 0.21% at $62.56 (as of 9:15 AM IST).
According to Amit Pabari, Managing Director at CR Forex Advisors, rising global crude prices pose a downside risk for the rupee. “Geopolitical tensions could lead to a further uptick in oil prices, thereby keeping the rupee under pressure,” he noted.
Technical Outlook: Key Support and Resistance Levels
On the technical front, the dollar-rupee pair is expected to face strong resistance in the 85.60–85.80 zone, while support is likely around the 85.20 level, Pabari added.
