Indian Rupee Closes Slightly Higher as US Dollar Slips Following Midterm Elections

The Indian rupee ended modestly higher on Wednesday, aided by a weaker dollar and lower oil prices as investors assessed the impact of US midterm election results. Meanwhile, a Reuters poll showed that expectations for the depreciation of the South Asian unit remained intact.

The rupee closed at 94.64 per dollar, up slightly from its close at 94.74 in the previous session. During early trading, the currency also touched a two-week high before trimming gains as importer and interbank dollar bids gathered steam around the 94.50 mark.

The movement followed political shifts in the United States, where Democrats captured majorities in both the Senate and House on Wednesday. The sweeping victories reached deep into Republican strongholds as tens of millions of voters delivered a rebuke to President Donald Trump.

Reflecting the broader market reaction, the dollar index—which measures the greenback against a basket of six major peers—was down 0.4% at 101.3. Currencies such as the euro, sterling, and Swiss franc led the gains against the greenback.

Market participants noted the challenges of sustaining these currency movements. A trader at a state-run lender stated that selling USD/INR is currently a risky endeavor since market dips have very limited staying power at these levels.

A majority of analysts polled by Reuters expect the rupee to give up its recent gains and slip again over the next few months as a volatile external environment continues to pressure the currency.

While a series of policy measures rolled out by the Reserve Bank of India (RBI) since the Iran war began has supported the currency, elevated oil prices and weak portfolio flows remain key risks.

A note from Natixis highlighted the limits of monetary intervention. According to the note, the RBI has intervened heavily, restricted currency markets, raised around $143 billion through a deposit and borrowing scheme, and raised interest rates. These measures have avoided a disorderly collapse and bought time.

However, the note added that none of these actions address the root causes of currency weakness. A central bank cannot create export capacity, manufacturing investment, or energy independence, emphasizing that only structural reforms can achieve this.

"While short-term fluctuations in the US dollar and oil prices provide temporary relief to the Indian rupee, businesses cannot rely on currency volatility for long-term planning. As noted by macroeconomic indicators, monetary intervention by the central bank buys valuable time, but true economic resilience requires fundamental structural reforms, enhanced export capacity, and energy independence. Founders and business leaders must account for persistent currency depreciation and external market risks in their strategic financial planning." — Dr. Shishir Gupta, Founder & CEO, StartupLanes