Rupee began Tuesday on a strong note, rising 26 paise to 94.96 against the US dollar in early trade, supported by robust domestic economic growth, containing fiscal slippage and portfolio-related inflows.Forex traders said the USD/INR pair appears to have found a strong near-term base around 95.10-95.20. MSCI-related inflows have also provided temporary support to the rupee.At the interbank foreign exchange market, the rupee opened at 95.06 against the US dollar before gaining further to touch 94.96. The currency had closed 21 paise higher at 95.22 on Monday after recovering from its initial losses.The dollar index, which measures the greenback’s strength against a basket of six currencies, was trading at 99.46, up 0.03 per cent.Brent crude, the global oil benchmark, rose 0.63 per cent to $91.06 a barrel in futures trade. The increase came after US President Donald Trump warned that the United States would “hit Iran hard” following missile attacks on American military bases in Jordan.Rupee’s gains came even as domestic equities started Tuesday’s session on a weaker note. The Sensex declined 121.48 points to 76,835.79 in early trade, while the Nifty fell 52.6 points to 24,027.80.Foreign institutional investors remained sellers in the equity market, offloading shares worth Rs 7,985.88 crore on a net basis on Monday, according to exchange data.Despite the recent selling, FPIs invested around USD 3.1 billion in August. This was their strongest monthly inflow in 23 months and marked the second consecutive month of net buying.However, foreign investors have remained net sellers of around USD 24.6 billion so far in 2026.“So, the direction has improved — but the broader foreign-flow picture is still not completely comfortable,” Pabari added.India’s economic growth also provided support to the rupee. The economy expanded 7.8 per cent in the April-June quarter, beating expectations and showing resilience despite concerns that the war in Iran and the resulting global economic uncertainty could weigh on growth.“The data is particularly noteworthy because it came during a period marked by Middle East tensions and elevated crude prices. Strong growth does not automatically strengthen a currency, but it does reinforce the perception that India’s domestic economy remains resilient despite global turbulence,” CR Forex Advisors MD Amit Pabari said.The fiscal position also remained a factor in the currency market. The central government’s fiscal deficit for 2026-27 stood at 26.8 per cent of the full-year target at the end of July, according to data released by the Controller General of Accounts (CGA) on Monday.In comparison, the fiscal deficit had stood at 29.9 per cent of the Budget Estimates (BE) of 2025-26 during the first four months of the previous financial year.
