The rupee gained 16 paise to open at ₹95 against the US dollar, as persistent intervention by the central bank and favourable near-term momentum helped offset pressure from rising US Treasury yields and higher oil prices.
The rupee rose 0.2% on Monday to a near four-week high, surprising most market participants.
A currency trader at a bank said that flow- and position-related dollar selling pushed the rupee towards the stronger end of its expected near-term range of ₹95.00– ₹95.80 per US dollar. The move was “definitely not expected”, particularly with oil prices around $90 a barrel, the trader said, according to a Reuters report.
The trader added that the rupee could extend its gains at the open, supported by the current momentum. However, momentum-driven moves have generally failed to sustain in the past, he cautioned. Importers are also likely to increase their hedging activity at current levels, he said.
India’s robust GDP numbers are also supportive for the rupee, although their impact is likely to remain marginal, the trader said, according to the Reuters report.
MSCI Effect: Temporary dollar supply
Market experts said the latest MSCI index rebalancing, effective from today, triggered substantial portfolio adjustments by global passive funds. Nearly $4.1 billion worth of trades passed through the NSE closing auction, making it one of India’s busiest closing sessions.
The rebalancing was estimated to generate around $1 billion in net foreign inflows, increasing dollar supply and helping push USD/INR down to 95.11. Experts, however, cautioned that these were largely execution-driven flows rather than a sign of renewed investor conviction.
Foreign money slowly returns
FPIs invested around $3.1 billion in August, marking their strongest monthly inflow in 23 months and the second consecutive month of net buying. However, foreign investors remain net sellers of around $24.6 billion in 2026, highlighting continued uncertainty.
Strong growth supports sentiment
Experts also pointed to India’s resilient economy, with GDP growth at 7.8% in the June quarter, above expectations of 7.1%. The strong growth outlook provides some support to the rupee despite global headwinds.
Oil, US rates remain key risks
However, Brent crude rose above $91 per barrel amid renewed tensions in the Middle East, raising concerns about India’s import bill and dollar demand. Meanwhile, changing US rate expectations are supporting the dollar. Experts said these factors could limit further rupee appreciation despite improved foreign flows.
Rupee Outlook
According to Amit Pabari, MD, Research Team at CR Forex Advisors, the USD/INR pair appears to have established a strong near-term base around 95.10–95.20. While MSCI-related inflows have provided temporary support to the rupee, sustaining gains below this zone could prove challenging.
Pabari said 95.80 remains the immediate resistance level for USD/INR. A decisive move above this level could open the way for the pair to advance towards 96.20–96.50.
“Until a fresh catalyst emerges, a consolidation phase between 95.20 and 95.80 looks most likely,” Pabari said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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