Indian rupee strengthens past 94/$ as oil slides, foreign inflows return

MUMBAI: The Indian rupee strengthened past 94 per dollar on Friday, regaining appeal among emerging-market currencies after spending much of the year in the doldrums, and also posted its best week in three weeks.

Helped by the unwinding of the once-dominant AI trade and a sharp fall in oil prices after the Democrats swept the US midterm elections, the rupee rose to its highest level since April 22, backed by strong inflows into equity and debt markets.

“The recent appreciation in the rupee is backed by the supportive mix of softer crude oil, easing yields and renewed foreign inflows post the US midterm elections outcome,” Dilip Parmar, a currency research analyst at HDFC Securities, said.

The Indian after hitting an all-time low of 96.96 in May.

For the week, the rupee has gained 1.1%, making it the second-best performer among Asian currencies. It was among the region’s top performers on Friday, when most regional peers weakened.

AI unwind, oil relief

For much of 2026, global investors have favoured technology-heavy markets, particularly in the US and North Asia, to build exposure to the AI trade.

Such a concentration of investment has worked against India, whose equity market has relatively limited exposure to the semiconductor and AI infrastructure supply chain, weighing on equities and the rupee.

That dynamic is now showing tentative signs of changing as concerns over the sustainability of massive AI infrastructure spending emerge amid the newly altered US political landscape.

Analysts at J.P. Morgan, Goldman Sachs and BlackRock have all in recent weeks highlighted India’s relative appeal if global investors look to diversify away from AI-heavy markets, with the country’s broad-based equity market and domestic growth drivers offering an alternative.

There are signs of this playing out.

Foreign investors have stepped up purchases of Indian equities, buying nearly $3 billion this week, including a $1.6 billion purchase on Thursday alone, the biggest single-day buying in nearly six years.

The decline in oil prices also comes as a large relief for the rupee, as India imports nearly 90% of its oil needs.

Brent crude is down nearly 20% this week, putting it on course for its steepest weekly drop since April 2020 on expectations that US President Donald Trump, whose Republican Party lost control of Congress, could seek a halt to the Iran war.

Last month, the Reserve Bank of India announced fresh measures to support the rupee, including opening a special window to provide dollars to government-owned oil importers directly from its forex reserves.

Rally to extend?

Parmar of HDFC Securities said the rupee may continue appreciating if foreign inflows into debt and equity persist.

“We are eyeing 93.70 immediately, and further appreciation could lead to 93.50. Rupee is expected to continue appreciating as this is a flow-driven strength,” he said.

If the rupee sustains a break below 94, this may trigger more exporter dollar sales and open the way towards 92.50, unless the RBI steps in to buy dollars, said Anindya Banerjee, head of currency and commodity research at Kotak Securities.