The rupee recovered over the past week, appreciating about 0.87 per cent or 84 paise to close at 95.6862 against the dollar on Tuesday. The rebound comes after the domestic currency had witnessed sharp weakness earlier this month amid geopolitical tensions and elevated crude oil prices.
A key factor supporting the rupee has been the easing in global risk sentiment. Markets turned relatively calmer on hopes of a possible US-Iran peace agreement, reducing concerns over a prolonged disruption in West Asia. Reflecting this, crude oil prices corrected sharply. Brent crude futures slipped below the $100-mark and were trading around $96 per barrel, down nearly 8 per cent so far this week. For an oil-importing country like India, lower crude prices help reduce pressure on the trade balance and support the rupee.
That said, foreign flows continue to remain weak. According to NSDL data, net FPI (Foreign Portfolio Investors) outflows stood at about $862 million over the past week, indicating that overseas investors are still cautious.
Domestically, there was some support to sentiment after Finance Minister Nirmala Sitharaman indicated that the government is willing to consider investor concerns regarding LTCG and STCG taxation. Any favourable changes on this front could improve market sentiment and potentially aid the rupee going ahead.
