The rupee may witness a limited recovery in the near term, but the broader bias remains bearish | Photo Credit: FRANCIS MASCARENHAS

The rupee remained largely stable over the past week and closed at 96.24 against the dollar on Tuesday. Although the local currency declined about 0.2 per cent during the session, erasing Monday’s gains, it largely held its ground amid mixed global cues.

Crude oil prices have once again emerged as a key headwind. Brent crude futures, currently trading around $90 per barrel, have surged nearly 25 per cent in July. The renewed strength follows fresh geopolitical tensions. Risks seem to be elevating after Yemen’s Iran-backed Houthis announced plans to impose a naval blockade against Saudi Arabia. The development has reinforced concerns that disruptions to energy supplies remain a persistent risk, keeping pressure on oil prices and the rupee.

Foreign flows, however, remained supportive. According to NSDL data, net FPI inflows stood at about $463 million over the past week, taking the cumulative inflows in July to $3.2 billion.

On the global front, the dollar continues to remain firm. While recent US inflation and labour market data have reduced expectations of a rate hike at next week’s Federal Reserve meeting, the greenback has continued to draw safe-haven demand amid the renewed geopolitical uncertainty. Consequently, the dollar index has climbed back towards the 101-mark. More importantly, it sustains above an important level of 100.50 limiting the rupee’s ability to benefit from positive foreign inflows.

Overall, the rupee remains caught between supportive capital flows and renewed external headwinds. As long as geopolitical tensions keep oil prices elevated and the dollar firm, the scope for a meaningful recovery in the local currency is likely to remain limited.

The rupee remained largely range-bound over the past week. However, it slipped to a nine-week low of 96.53 on Monday before recovering to close at 96.24 on Tuesday. The chart indicates that the broader trend continues to remain negative.

That said, there is room for a modest recovery from the current level. The rupee can appreciate to 95.80 and, if this resistance is breached, the recovery could extend to 95.40. However, given the prevailing bearish momentum, a sustained move beyond 95.80 appears unlikely. The price action in the dollar index also supports this view.

The dollar index continues to trade comfortably above the crucial support at 100.50, keeping the broader bias positive. In the near term, the index is likely to advance towards 101.50 and then 102. Such a move could prevent the rupee from recovering to 95.80 and instead increase the likelihood of a decline towards its record low of 96.96.

On the other hand, if the dollar index corrects towards 100.50, the rupee may recover to 95.80. However, the support at 100.50 is expected to remain firm. Therefore, the most likely near-term scenario is a recovery towards 95.80, while a stronger dollar could drag the rupee back towards its all-time low of 96.96.

The rupee may witness a limited recovery in the near term, but the broader bias remains bearish. A sustained rise in the dollar index could drag the local currency towards its record low of 96.96, while any recovery is likely to face resistance at 95.80.

Published on July 21, 2026