Key Highlights :
Rupee increased 21 paise to ₹85.34 against the US dollar in early trade, supported by a weaker dollar.
Gains were checked by stronger global crude prices and ongoing foreign capital outflow of more than ₹2,400 crore.
Key Background :
Indian rupee started the week stronger, appreciating to ₹85.34 against the US currency in early trade, a move that was largely fueled by a weaker local as well as global dollar. Market participants responded to indications of an advance rate-cut plan by US policymakers, weakening the dollar and strengthening emerging market currencies like the rupee.
The US dollar index against six major world currencies declined by approximately 0.27% when overall demand for the greenback eased globally. Expectations that President Trump would press ahead with speeding up Jerome Powell’s replacement as Federal Reserve Chairman even further fueled speculations of a move towards loose monetary policy and interest rate reductions, pressuring the dollar.
But appreciation in the rupee was tempered by strong headwinds, foremost higher crude oil prices. Brent crude futures rose 1.3% to trade at about USD 68 per barrel, supported by a strengthening of evidence of firm demand, including a sharp fall in US oil inventories. Meanwhile, a lull in the Israel-Iran theater damped concerns over supply disruption but did not do much to quell high oil prices—a key driver of India’s import bill.
Overseas institutional investors (FIIs) once again continued their trend of sucking money out of Indian equity markets, net sold approximately ₹2,428 crore worth of assets. Persistent FII selling is a challenge to the rupee as capital outflow is capable of exerting bear pressure on the currency even with favorable global conditions.
Domestically, equity markets hardened first. The BSE Sensex climbed some 163 points to some 82,919, and the NSE Nifty climbed nearly 64 points to some 25,309. Equities’ upbeat sentiment may ease some heartburn for the rupee, but currency markets remain hogged by international oil and dollar movements.
Fore ahead, analysts are forecasting the rupee to be in ₹85.20–₹85.50 range. Factors to keep an eye on are crude oil price movements, shifts in expectations regarding global interest rates, patterns in FII flows, and US monetary policy changes—specifically formal developments in the nomination of a new Federal Reserve Chair or telegraphing rate cuts.
Overall, as much as international signals offered an early boost, the sustainability of the rupee’s strength will much depend on course management of domestic outflows and changing global commodity and monetary trends.
