The local currency continued to benefit from positive foreign inflows, a softer dollar and lower crude oil prices
The rupee appreciated about 0.5 per cent, or 48 paise, over the past week to close at 95.38 against the dollar on Tuesday. The local currency continued to benefit from positive foreign inflows, a softer dollar and lower crude oil prices. The Reserve Bank of India’s (RBI) recent measures have also lent support. Announced during the previous monetary policy, the steps include incentives for overseas dollar deposits and easier access to government securities for foreign investors. These measures have helped attract capital inflows, strengthening India’s external sector.
The RBI’s monetary policy decision on Wednesday will be closely watched, although the central bank is widely expected to keep rates unchanged. According to NSDL data, net FPI inflows stood at about $704 million over the past week. Consequently, cumulative inflows in August so far stand at around $321 million.
The external environment has also turned favourable. The dollar index, currently hovering around the 100 mark, declined about 1.6 per cent last week. Crude oil prices have softened further, with Brent crude futures, trading around $82/barrel, down nearly 20 per cent from the recent high of $102 on July 23. The benchmark has also fallen about 7 per cent so far this week, reducing pressure on India’s import bill and the rupee.
That said, uncertainty surrounding West Asia continues to linger. While US President Donald Trump said discussions with Iran were underway and described it as Tehran’s “last chance” to reach an agreement, Iran denied that any negotiations were taking place, keeping markets on edge.
On the domestic front, manufacturing activity showed signs of moderation, with India’s Manufacturing PMI easing to 53.5 in July, the lowest reading in five years. Nevertheless, the combination of a softer dollar, lower crude oil prices and positive foreign inflows continues to provide support to the rupee in the near term.
Below is the technical analysis.
Chart
The rupee surpassed the hurdle at 95.80 by mid-last week. It extend the gain to hit a high of 95.11 on Monday before moderating to the current level of 95.38. The resistance at 95.20 capped the gains. The path from the current level depends on the outcome of the RBI policy, which can be short lived, and how the dollar moves.
The dollar index, while it has seen a sharp fall during the last week, is now trading near a key trendline support of 99.50. It rebounded from the level and is now hovering around 100. Further recovery can lift the dollar index to 100.50 and subsequently to 100.80. In such a scenario, the rupee can decline to 96-96.20 against the dollar.
However, if the dollar index loses strength and breaches the support at 99.50, it can open the door for a deeper fall to 98.80 or even to 98. In this case, the rupee can cross over the immediate resistances at 95.20 and 95 and rise to 94.
Outlook
The chart of the rupee appears positive though there are geopolitical uncertainties. However, the dollar is near a support and a rally can weigh on the rupee. Moreover, post the announcement of RBI policy, there the dollar-rupee exchange rate could be subject to higher volatility.
Overall, the direction is unclear, but the rupee is likely to swing within 95 and 96 in the near-term as RBI might also try to maintain stability.
Published on August 4, 2026
