Rupee strengthens to 95.41 after oil cools

Mumbai: The Indian rupee strengthened to 95.41 on Tuesday due to a decline in oil prices and reduced dollar sales from the Reserve Bank of India (RBI), according to traders. The rupee closed at 95.41, down from the previous close of 95.74, and traded in the range of 95.40-95.75, with state-run banks selling dollars, likely on behalf of the RBI at lower levels, dealers reported.

Brent crude oil prices dropped more than 3% to $89.2 per barrel, Reuters reported. The rupee is expected to remain between 95.25 and 95.75 on Thursday. Domestic markets are closed on Wednesday for a religious holiday. A trader from a state-run bank indicated that the rupee's sudden gain in the second half of the trading day was due to positive developments in West Asia, though gains were limited due to the absence of confirmed news.

Dealers also noted that state-run banks were active on behalf of the central bank during the first half of the trading day. Oil prices fell as markets perceived the latest US sanctions on Iran as less disruptive to oil supplies than a potential military escalation; the measures are viewed as an economic pressure campaign rather than an immediate threat to Iranian exports.

The rupee traded within a narrow range of 95.70-95.75 before the news, having depreciated 0.6% so far this fiscal year. Dealers will now be examining comments from Federal Reserve Chair Kevin Warsh on Friday for insights into potential US interest rate changes. The likelihood of upcoming talks between Washington and Tehran has also diminished, causing yields on the benchmark 10-year bond to decline by two basis points, closing at 6.85%.