Indian Rupee Appreciates 0.5% Over the Week, Faces Key Resistance Levels Amid Global Headwinds

The Indian rupee registered an appreciation of about 0.5 per cent, or 45 paise, over the past week, closing at 94.95 against the US dollar on Tuesday. The currency began its recovery after finding support at 95.75 and displayed positive momentum over the last three sessions.

Despite the recent gains, the near-term macroeconomic backdrop remains mixed. According to National Securities Depository Limited (NSDL) data, foreign portfolio investors (FPIs) recorded net outflows of approximately $377 million over the past week. Nevertheless, cumulative FPI flows for August remained in positive territory, with net inflows totaling around $2.6 billion.

External factors continue to exert pressure on the local currency. Crude oil prices have emerged as a significant headwind following renewed geopolitical tensions. US President Donald Trump warned of a strong response against Iran after renewed military exchanges between the two nations, reviving concerns over potential supply disruptions in the Middle East. Consequently, Brent crude futures rose to around $92 per barrel, and a sustained increase in oil prices could weigh further on the rupee.

Additionally, the outlook for US monetary policy remains a critical variable. Remarks by Federal Reserve Chairman Kevin Warsh at the Jackson Hole symposium were interpreted as hawkish by markets, increasing expectations of another interest rate hike. Warsh emphasized the need for further policy action if inflation fails to move convincingly toward the Fed's 2 per cent target.

From a technical standpoint, the rupee faces immediate resistance at 94.90, alongside a rising trendline resistance at 94.80. Market observers indicate that a decisive breakout above 94.80 could extend the currency's rally toward 94.50 and potentially to 94.20. Conversely, if the rupee fails to surpass the 94.80-94.90 resistance region, it could retreat to 95.40, with the next support level situated at 95.75.

Meanwhile, the dollar index found support at 98.50 approximately two weeks ago and has since recovered to trade at 99.60. For the dollar index to establish a sustained uptrend, it requires a break above the resistance level at 100, which could lift it toward 100.50 and subsequently 101. On the downside, supports are seen at 99 and 98.50.

"Fluctuations in currency values and crude oil prices directly impact the operational and import costs for businesses across sectors, including startups dealing in global supply chains. While the rupee has shown resilience with a 0.5 percent weekly gain, founders and business leaders must closely monitor macroeconomic indicators such as FPI outflows and US interest rate trajectories. Maintaining robust cash flow management and hedging against currency volatility will be essential as the rupee navigates key technical resistance levels amid ongoing geopolitical tensions." — Dr. Shishir Gupta, Founder & CEO, StartupLanes