The Indian rupee gained 28 paise to close at 94.94 against the US dollar on Tuesday, marking its strongest level in nearly two months.

The currency was supported by strong domestic economic growth, portfolio-related inflows and expectations of possible Reserve Bank of India (RBI) intervention. The rupee opened at 95.06 and moved between an intraday high of 94.79 and a low of 95.10 before settling at 94.94.

Forex traders said recent MSCI-linked foreign inflows provided temporary support to the rupee. Foreign portfolio investors had invested around $3.1 billion in Indian equities during August, marking their strongest monthly inflow in 23 months and the second consecutive month of net buying. However, foreign investors remain net sellers of around $24.6 billion so far in 2026.

The rupee also received support from India’s strong economic performance. The Indian economy grew 7.8% in the April-June quarter, beating expectations and highlighting resilience despite concerns over geopolitical tensions and global economic uncertainty.

The government’s fiscal position also remained relatively controlled, with the fiscal deficit at 26.8% of the full-year target by the end of July, compared with 29.9% during the same period of the previous financial year.

However, higher crude oil prices limited the currency’s gains. Brent crude was trading around $92.27 a barrel, up 1.97%, amid renewed geopolitical tensions involving the US and Iran. Higher oil prices can increase India’s import bill and raise demand for dollars, putting pressure on the rupee.

The dollar index was also trading at 99.58, up 0.15%, which added another headwind for the Indian currency. Analysts expect the rupee to remain sensitive to crude prices, geopolitical developments and US monetary policy expectations.

Overall, the rupee’s move to 94.94 is positive for the currency, but sustained appreciation could remain difficult if crude prices stay elevated and geopolitical risks continue to drive dollar demand.

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