Rupee closes at a 2-month high on possibility of de-escalation West Asia war

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SENSEX 79,310.01

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+ 166.00

GOLD 144,136.00

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Market watchers cited declining US yields, renewed risk appetite from foreign inflows, and bargain buying as the currency climbed for a fifth straight session, with eyes on nearby 94.00 support and 94.90 resistance

By BL Mumbai Bureau

Updated - November 05, 2026 at 09:20 PM.

The Indian unit closed at 94.47 per USD, a level last seen in early September | Photo Credit: Rasi Bhadramani

The rupee (INR) closed at a two-month high on Thursday on expectations the US will de-escalate the Middle East war after the Democrats swept the midterm elections, falling US Treasury yields, softening crude oil prices and a weakening dollar.

The Indian unit closed at 94.47 per USD, a level last seen in early September, up 17 paise, against the previous close of 94.64. Intraday, INR tested a high/low of 94.32/94.57.

Dilip Parmar, Senior Research Analyst, HDFC Securities, noted that the Indian rupee extended its northbound journey for the fifth consecutive session, supported by a declining US dollar and lower Treasury yields.

“Risk-on sentiment, driven by foreign fund inflows and softer crude oil prices, further underpinned the domestic currency. Spot USD/INR retraced to its October lows, triggering some bargain buying in today’s session. In the near term, the pair faces psychological support at 94.00, with resistance pegged at 94.90,” he said. 

US political Shift

Axis Bank’s economic research team, comprising Tanay Dalal, Senior Vice President, and Vipul Jindal, Assistant Vice President, in a report, opined that the US political shifts with the blue wave (Democrat win in the mid-term elections) can directly impact INR fair value, as a retreat from the Middle-East conflict can improve terms of trade, and a slower AI rollout can pull costs of capital lower and protect productivity.

However, the great power competition is unlikely to end, leading fiscal spending to continue (the national debt of major countries in conflicts tends to increase) and continuing to draw down on savings. These have driven the financeable CAD (current account deficit) to 0 per cent and a basic balance deficit since 2023.

The estimates of the Bank’s economic research team show that fair value is still weaker than current levels, though depreciation of fair value may no longer outpace actual depreciation. This is also visible in lower forwards and a smaller covered interest parity gap.

Low forex reserves

Further, forex reserves’ adequacy is still low, whether by traditional measures or by the IMF’s Assessing Reserve Adequacy (ARA). The report said the necessity of reserve re-accumulation will likely preserve the depreciation trajectory ahead, holding our 100 by June 2027 view for now.

Rajeev Sharan, Head of Research, Brickwork Ratings, said, “What changed today is that the war premium in energy prices finally cracked. Overnight, Brent crude plunged below the psychological $100 mark to $93.64 per barrel after the US midterm elections reduced fears of military escalation with Iran.”

“Combined with a softer dollar index at 101.22, a 1,400-point Sensex rally, and ₹7,284 crore in foreign stock inflows, the macro tide has turned in India’s favour. Yet the rupee’s early dip proves a vital point. Even when oil crashes and foreign cash floods in, the rupee will climb slowly because importers and the RBI are using every rally to buy cheap dollars,” he added.

Published on November 5, 2026

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