The rupee continued its recovery and appreciated about 0.4 per cent (42 paise) over the past week to close at 95.27 against the dollar on Tuesday. The local currency has now recovered about 1.7 per cent from the record low of 96.96 touched on May 20.The rebound comes despite continued foreign outflows. According to NSDL data, net FPI outflows stood at about $2.3 billion over the past week. However, the pressure from outflows was offset by a sharp correction in crude oil prices. Brent crude futures ($94/barrel) slumped 12 per cent last week, reducing concerns over India’s import bill and offering support to the rupee.Notably, the recovery has come even as the dollar index remained largely flat over the past two weeks. This suggests that domestic factors have also contributed to the rupee’s gains.Economic data released recently indicate resilience in the domestic economy. Supported by a 6.2 per cent growth in manufacturing, India’s Index of Industrial Production (IIP) expanded 4.9 per cent in April, compared with 3.2 per cent in the preceding month. In addition, the Centre managed to contain the fiscal deficit at 4.4 per cent of GDP in FY26, in line with its target, and has set a lower target of 4.3 per cent for FY27.That said, uncertainty surrounding the Middle East continues to linger. While fresh military exchanges involving Iran and Israel have kept markets cautious, diplomatic efforts remain active. The US President Donald Trump recently expressed optimism about reaching an agreement with Iran to extend the truce and reopen the Strait of Hormuz.Overall, easing crude prices and resilient domestic indicators have aided the rupee, although geopolitical developments remain a key risk.Chart The rupee has witnessed a notable recovery in recent sessions. After touching a three-week high of 94.75 on Monday, it has moderated to 95.27. The chart indicates that 95 is a key resistance level.A breakout above 95 can extend the recovery towards 94.50 and subsequently to 94.20. On the other hand, if the local currency weakens from the current level, it can find support at 95.75 and 96. The next support below 96 is at 96.25.In the near term, the rupee is likely to move sideways, in line with the prevailing trend in the dollar index.Since May 18, the dollar index has been oscillating within the 98.90–99.50 range. The direction of the breakout from this band will likely determine the next leg of the trend. A breach of 99.50 can lift the index to 100.50, whereas a break below 98.90 can drag it to 98.Therefore, if the dollar index rallies to 100.50, the rupee could weaken towards 96.25. Conversely, a decline in the index to 98 may help the local currency appreciate towards 94.20.Outlook Overall, the rupee appears to have entered a consolidation phase after the recent recovery. In the near term, the local currency is likely to trade within the 95–96 range, with the next directional move depending largely on which side does the dollar index breaks out of the 98.90–99.50 band.Published on June 2, 2026