The rupee closed at 95.35 per dollar, up 0.4% from its close in the previous session.
Asian currencies were mostly stronger as well, helped along by a drop of about 2% in Brent crude prices after Iran and Israel said on Monday that they had halted attacks on each other after an appeal from U.S. President Donald Trump.
Tehran has continued to block most shipping through the Strait of Hormuz, which carried a fifth of the world’s crude oil and liquefied natural gas before the war. Washington has imposed its own blockade of Iranian ports.
Elevated oil prices have raised the risks confronting India’s economy.
While the country has announced a flurry of measures to contain the impact on the rupee and foreign exchange reserves, the latest of which were from the Reserve Bank of India on Friday, analysts say the broader drag on economic growth, inflation and government finances is set to increase as long as oil prices remain elevated.
“We think the measures announced by the RBI will help to alleviate some of the pressure on the INR and help to eliminate BoP vulnerabilities. Nonetheless, the current account deficit remains heavily oil-driven,” analysts at Barclays said in a note.The rupee is likely to be on a depreciating path in the weeks and months ahead, albeit at a much more gradual pace than in past months, the note said.
Elsewhere, shares of Indian banks gained on Tuesday after the country’s central bank extended a subsidised forex swap facility to overseas foreign currency borrowings by lenders. The Nifty bank index rose 2% and the broader Nifty 50 was up 0.5%.
