The Indian rupee ended marginally lower on Wednesday, falling 2 paise to close at Rs 94.97 against the US dollar. 

The currency remained under pressure from higher crude oil prices and a stronger dollar, although support from the Reserve Bank of India helped limit the decline. The rupee had closed at Rs 94.95 in the previous session.

The latest move came as geopolitical tensions in West Asia increased concerns over global energy supplies. Brent crude climbed sharply towards $97 a barrel after renewed tensions involving the US, Iran and other countries in the region. 

Higher oil prices are a concern for India because the country depends heavily on imports to meet its crude oil requirements. A sustained rise in crude can increase the import bill and create additional demand for dollars, putting pressure on the rupee.

The dollar also remained firm in global markets. The dollar index rose to around 99.87 as investors moved towards the US currency amid geopolitical uncertainty and expectations that the Federal Reserve could maintain a relatively tight monetary policy. US Treasury yields also moved higher, adding to the dollar’s appeal.

However, the rupee has received support from active intervention by the RBI. Reuters reported that the central bank has been selling dollars in the market to prevent excessive volatility. A sharp increase in FCNR(B) deposits has also strengthened the RBI’s foreign exchange position and provided additional room to support the domestic currency.

The rupee’s recent stability comes after it strengthened to a near two-month high earlier in the week. On Tuesday, it closed at Rs 94.95, helped by dollar inflows from foreign banks and RBI intervention. The currency had also benefited from equity-related foreign inflows linked to MSCI index adjustments.

For the Indian economy, the outlook for the rupee will depend largely on crude oil prices, global dollar strength, foreign investment flows and RBI intervention.

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