The Indian rupee settled 12 paise higher at 95.58 against the US dollar on Wednesday, recovering slightly after recent losses, even as renewed tensions between the United States and Iran kept market sentiment cautious.
Forex traders said uncertainty surrounding developments in West Asia, particularly around the Strait of Hormuz, continued to weigh on investor confidence, while a firm US dollar and weak domestic equities limited gains for the Indian currency.
At the interbank foreign exchange market, the rupee opened at 95.60 against the greenback and slipped to an intraday low of 95.79 before recovering during late trade.
The domestic currency had closed at 95.70 against the US dollar on Tuesday after weakening by 44 paise.
According to market experts, investors are now closely watching the upcoming Reserve Bank of India (RBI) Monetary Policy Committee meeting scheduled from June 3 to 5 for further policy cues.
“We expect the rupee to trade with a negative bias on renewed tensions between the US and Iran and concerns over military action in the Middle East. However, softening crude oil prices may support the rupee at lower levels,” said Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan.
He added that the USD/INR spot price is expected to move within the 95.50 to 96.10 range in the near term.
Meanwhile, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was trading marginally lower at 99.07.
“Uncertainty around the Strait of Hormuz is keeping the dollar index well supported through safe-haven demand,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
On the commodities front, Brent crude prices eased 3.02 per cent to trade at USD 96.57 per barrel in futures trade, offering some support to oil-importing economies like India.
Domestic equity markets, however, ended lower on Wednesday. The BSE Sensex declined 141.90 points to settle at 75,867.80, while the NSE Nifty slipped 6.55 points to close at 23,907.15.
Foreign institutional investors (FIIs) remained net sellers in Indian equities, offloading shares worth Rs 1,042.70 crore, according to exchange data.
