USD vs INR: Rupee gains nearly 1.5% intraday; what factors are supporting the rally?

USD vs INR: The rupee strengthened sharply against the US dollar in early trade on Monday amid hopes of easing geopolitical tensions in the Middle East after signs emerged that the US and Iran were moving closer to a peace deal. However, concerns around possible blockades on the Strait of Hormuz continued to remain in focus.

USD vs INR

According to data from Morningstar, the rupee appreciated 40 paise to 95.20 against the US dollar in early trade. The domestic currency also touched an intraday high of 94.29 against the greenback compared to its previous close of 95.72. This marks an appreciation of nearly 1.49 per cent for the rupee from the previous closing level.

At around 10:35 am, the USD/INR pair was trading at 95.3338, down 0.40 per cent or 0.3860 for the day, as per Morningstar data.

Strait of Hormuz in focus

CR Forex Advisors Managing Director Amit Pabari said a full reopening of the Strait of Hormuz would be a major positive for India because the route carries nearly one-fifth of global oil and LNG shipments.

He added that softer crude oil prices would directly support the rupee and improve overall market sentiment toward emerging markets such as India.

Rupee outlook

Pabari said the 96.20–96.40 zone is expected to act as a strong resistance area for the USD/INR pair from a technical perspective.

He believes that if crude oil prices remain contained and global risk sentiment continues to improve, the rupee could gradually appreciate further toward the 94.80–94.50 zone in the near term.