The Indian rupee edged higher against the US dollar on Wednesday, helped by a decline in crude oil prices and hopes that diplomatic efforts between the US and Iran could ease tensions in West Asia.

The rupee opened at 95.56 per dollar, gaining three paise from Tuesday’s close of 95.59, according to Moneycontrol. It was later quoted around 95.57 per dollar, up two paise.

The modest recovery comes after the rupee has faced pressure from elevated oil prices, foreign fund outflows and uncertainty in global markets. Traders are now closely watching crude prices and developments around the US-Iran talks for clues about the currency’s next move.

One of the biggest positives for the rupee has been the recent fall in crude oil prices. Brent crude was trading near $99 a barrel, after briefly moving above $100 earlier. The benchmark has fallen from levels above $109 last week, giving some relief to oil-importing countries such as India.

Lower crude prices are important for the Indian economy because the country imports a large portion of its oil requirement. A fall in the price of crude can reduce India’s import bill and demand for dollars, which can support the rupee.

The latest decline in oil prices has also been linked to hopes of a diplomatic breakthrough between the US and Iran. Investors are watching discussions around the conflict closely because any easing of tensions could improve the supply outlook and keep oil prices under pressure.

However, the situation remains uncertain. US President Donald Trump, while addressing the United Nations General Assembly, warned Iran of severe consequences if an agreement was not reached, while also indicating that a deal could be possible. This has left investors cautious about the outlook for crude and global risk sentiment.

The US dollar remained another source of pressure on the Indian currency. The dollar index was above the 100 mark and near a two-month high. A firm dollar generally makes it harder for emerging-market currencies such as the rupee to strengthen.

Asian currencies offered some support, though trading remained mixed. The Philippine peso and Malaysian ringgit gained 0.21% each, while the Taiwan dollar and Thai baht also strengthened. The South Korean won edged higher as well. On the other hand, the Indonesian rupiah, Japanese yen and Chinese renminbi weakened against the dollar.

The Reserve Bank of India (RBI) also remains an important factor in the currency market. Traders said the central bank has been intervening intermittently to prevent the rupee from weakening beyond the 96-per-dollar level. Such intervention can help smooth sharp movements, particularly when demand for dollars rises suddenly.

Foreign fund flows are another concern for the rupee. Foreign institutional investors remained net sellers in Indian equities for the second straight session on Tuesday, selling shares worth around ₹3,800 crore. Domestic institutional investors provided some support by buying equities worth about ₹4,120 crore.

Foreign selling can put pressure on the rupee because overseas investors generally need to convert their Indian investments into dollars when taking money out of the domestic market.

The currency’s movement also comes as Indian equity markets showed signs of recovery on Wednesday. The Sensex and Nifty opened higher, with the Nifty moving above the 23,400 level during morning trade. A stronger domestic market can improve sentiment towards Indian assets, although continued foreign selling remains a factor to watch.

Market participants are also keeping an eye on interest-rate expectations in the US and India. A stronger dollar, expectations of tighter US monetary policy and changes in US bond yields can influence global capital flows and the rupee.

Analysts are watching the 95.70 level closely. Amit Pabari, managing director of CR Forex Advisors, said that if USD/INR remains below 95.70, the rupee could potentially move towards the 95-95.20 zone. This is an analyst view rather than a guaranteed market outcome.