The Indian Rupee (INR) opened higher against the US Dollar on Tuesday, with the USD/INR pair correcting to near 96.34 from its two-month high of 96.76 posted on Monday. This appreciation was attributed to renewed hopes for de-escalation in military aggression between the United States and Iran, which have supported the Indian currency [1]. The optimism for Middle East peace has also led to a pause in the oil price rally, benefiting oil-importing economies like India. In opening trade, the MCX Crude Oil contract expiring on August 19 was marginally down to near Rs. 7,945, after crude oil prices corrected sharply from a five-week high of Rs. 8,158 on Monday [1].
A senior Iranian official confirmed on Monday that Iran had received a proposal for a 10-day cessation of strikes from mediators, aiming to revive the interim deal with the US. This development has restored some confidence in financial markets, indicating that negotiations remain active. According to an Axios report, US President Donald Trump will either accept the 10-day ceasefire and resume negotiations toward an interim deal or call for a joint full-scale military campaign with Israel against Iran [1]. The prospect of peace is expected to keep oil prices' upside limited, but continued hostilities could increase global volatility [1].
Despite the positive sentiment for the Rupee, Foreign Institutional Investors (FIIs) have continued to sell their holdings in the Indian stock market, extending their selling streak for the sixth consecutive trading day on Monday. Over the last six sessions, FIIs have sold stakes worth Rs. 10,240.80 crore. This cautious stance is attributed to the ongoing Q1FY27 earnings season and the government's decision not to scrap the Long-Term Capital Gains (LTCG) tax, which has been cited as a key reason for the persistent outflow of foreign funds. Minister of State for Finance Pankaj Chaudhary stated, 'At present, there is no such proposal under consideration. The tax policies, including capital gains tax rates, are reviewed periodically as part of the annual budgetary process, and legislative revisions are made after taking into consideration the macroeconomic parameters,' as reported by The New Indian Express [1].
From a technical perspective, USD/INR trades lower at around 96.34 but maintains a bullish near-term bias, as the spot remains above the 20-period exponential moving average (EMA) at 95.73 [1].
CONCLUSION
The Indian Rupee has gained on hopes of a US-Iran ceasefire, which has also eased oil prices, providing relief to India's economy. However, persistent FII outflows due to tax policy concerns and cautious sentiment around earnings season continue to weigh on Indian equities. The market remains sensitive to developments in Middle East negotiations and domestic policy signals.