The rupee closed at 94.74 per dollar, up from its close at 94.90 in the previous session. While the currency had jumped as high as 94.62 in early trading, it trimmed gains as oil prices rebounded after slumping nearly 11% in the previous session.
Oil prices rose more than $1 on Tuesday, as an Iranian official said a deal to end the war was far off, while the United States struck Iran’s Qeshm Island, fuelling concerns over the escalation of hostilities and risks to energy supplies.
The US-Iran war, which started in late February, has become a leading cause of high energy prices worldwide and stoked economic risks for India, which imports about 90% of it oil requirements.
Results of the US midterm elections and how they influence US President Donald Trump’s policies will be in focus for markets in the near term.
Nonpartisan analysts favor Democrats to wrest the House of Representatives from the Trump-led Republican Party, while control of the Senate remains uncertain.
“We don’t expect today’s US midterm results to cause structural shifts in FX, but the dollar may face some short-term pressure should the Democrats secure both the House and the Senate,” ING said in a note.On Tuesday, the dollar index was little changed at 101.7.
Elsewhere, dollar-rupee forward premiums dipped slightly, with traders awaiting fresh cues to gauge momentum in the near-term.
Despite the rupee’s recent rally from near-record low levels last month, signals from options and forward markets show that investors remain wary of further weakness and are seeking protection against fresh declines.
