Mumbai

The rupee strengthened sharply for the second consecutive session on Monday, rising 47 paise to settle at 94.71 (provisional) against the US dollar, supported by a steep fall in global crude oil prices following reports of a peace agreement between the United States and Iran.

A rally in domestic equities and weakness in the US dollar also boosted sentiment for the Indian currency, forex traders said.

Rupee extends gains

At the interbank foreign exchange market, the rupee:

• Opened at 94.70 against the dollar,
• Traded in a range of 94.45 to 94.77, and
• Closed at 94.71, gaining 47 paise over Friday's close.

The domestic currency had already surged 67 paise to 95.18 per dollar on Friday, extending its recovery.

US-Iran deal eases oil concerns

Market sentiment improved significantly after US President Donald Trump announced that the United States and Iran had finalised an agreement aimed at ending their 107-day conflict and reopening the Strait of Hormuz, a crucial route for global oil shipments.

The agreement is expected to be formally signed in Switzerland on June 19.

Trump wrote on Truth Social:

"The deal with the Islamic Republic of Iran is now complete. Congratulations to all."

The development eased fears of prolonged supply disruptions in the energy market.

Crude prices slide

Reflecting the improved geopolitical outlook, Brent crude futures dropped sharply.

• Brent crude declined 4.97 per cent to USD 82.99 per barrel.

Lower oil prices are particularly beneficial for India, one of the world's largest crude importers, as they help reduce import bills and ease pressure on the current account deficit.

Analysts see positive momentum

Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said:

"The Indian rupee rose for the second consecutive day on a rise in risk appetite in global markets amid the US-Iran deal. This led to a sharp rally in global risk assets and a fall in global crude oil prices."

He added that:

• The weaker US dollar,
• Declining US Treasury yields, and
• Reduced inflation concerns

also supported the rupee.

Choudhary expects the rupee to maintain a positive bias and projected the USD-INR pair to trade between Rs 94.20 and Rs 94.95 on Tuesday.

Dollar weakens

The US Dollar Index, which measures the greenback against a basket of six major currencies, slipped:

• 0.20 per cent lower to 99.65.

Domestic markets rally

Indian equity benchmarks ended the day strongly higher:

• The BSE Sensex surged 1,126.72 points (1.49 per cent) to close at 76,654.67.
• The Nifty 50 advanced 231 points (0.98 per cent) to settle at 23,853.90.

Structural support for rupee

According to V K Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd:

"The crash in Brent crude below the USD 83 level will significantly reduce India's current account deficit for FY27. This is the principal reason behind the rupee's strength."

He added that:

• Foreign institutional investor (FII) selling could slow,
• Strengthening rupee dynamics make further heavy outflows less attractive, and
• Capital mobilisation through FCNR(B) deposits by banks is also lending support.

Economic indicators remain mixed

Despite the currency gains, domestic macroeconomic indicators presented a mixed picture:

• Wholesale inflation climbed to a record 9.68 per cent in May, led by higher fuel and food prices.
• Merchandise exports rose 18 per cent to USD 45.2 billion.
• Imports increased 20.62 per cent to USD 73.41 billion, resulting in a trade deficit of USD 28.21 billion.

Meanwhile, according to exchange data:

• Foreign institutional investors sold equities worth Rs 1,082.18 crore on a net basis on Friday.

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India's foreign exchange reserves also declined by USD 711 million to USD 681.61 billion during the week ended June 5, according to data released by the Reserve Bank of India