Around 6.15 IST on Tuesday, the US dollar index, which gauges the value of the dollar against six significant rival pairs, was at 105.67. In the latter part of July, it increased to a 20-year high of 108.54.

Dollar declines as lower Fed increase expectations push the rupee below 79.

After nine months of sales, foreign portfolio investors start buying Indian stocks on a net basis. The rupee rose above 79 against the dollar for the first time in a month as demand for developing market currencies increased due to global dollar weakness and a drop in crude oil prices.

The rupee was trading at 78.60 to the dollar at 11.45 IST, down from 79.03 at Monday's previous closing. The US dollar index, which compares the value of the dollar to six important rival pairings, was at 105.22 as opposed to 105.41 at 3:30 pm IST.

The strength of the US dollar globally has significantly decreased as a result of speculation that the US Federal Reserve is slowing down the pace of its rate hikes. In late July, the index reached a 20-year high of 108.54.

The appeal of emerging market assets to foreign investors is increased by a slower rate of the rate increase in the US and a weaker currency. The Fed has increased rates at a quick clip thus far in 2022, which has caused a significant migration of foreign capital from Indian stocks and put pressure on the rupee. After nine months of net sales of Indian stocks, starting in October 2021, foreign portfolio investors have started to net buy them.

The rupee has gained significant ground since experiencing a bout of increased volatility last month as markets all across the world have begun to get confident about a less aggressive pace of US rate hikes. On July 19, the rupee fell to a record low of 80.06 against the US dollar. It has lost ground against the dollar so far in 2022 by about 5.4%.

"FIIs turning into net buyers and improving mood around the world continue to support the rupee's rise. The rupee is also benefiting from the weaker dollar index. The decline in the dollar index continues as a less aggressive stance by the Fed is perceived to weaken the dollar, according to experts at Mecklai Financial Services in a note.

The company stated that "weaker manufacturing data prompts concerns regarding the demand for the black gold" as oil prices continue to decline.

According to Reuters, on Tuesday, WTI crude prices dropped 22 cents to $93.67 a barrel while Brent crude futures dropped 29 cents to $99.74 a barrel. Given that more than 80% of India's oil needs are imported, lower oil prices have a positive impact on the country's current account deficit and inflation.