The Indian rupee strengthened 46 paise, or 0.44%, to 94.45 against the US dollar on Wednesday, October 21, supported by optimism over a potential India-US trade agreement after US President Donald Trump indicated that a deal could be announced soon.
Ongoing US diplomatic engagement with India has further improved market sentiment while measures taken by the Reserve Bank of India (RBI) to regulate dollar purchases, including dedicated banking arrangements for oil marketing companies, have continued to support the domestic currency.
However, elevated crude oil prices remain a key headwind, limiting the scope for further appreciation. Brent crude trading above $110 a barrel could weigh on the rupee, according to Jateen Trivedi, vice-president and research analyst for commodities and currencies at LKP Securities.
“The rupee could face resistance in the 94.25–94.40 zone,” Trivedi said.
Despite the recent recovery, the rupee is expected to remain under pressure as tighter global financial conditions and persistent foreign portfolio outflows make it harder to bridge the country's external financing gap.
India's current account deficit (CAD) has narrowed to around 0.5% of gross domestic product (GDP), from about 2.5% three years ago. However, the improvement has not been sufficient to offset external pressures on the currency.
