The Indian rupee appreciated sharply against the US dollar on Monday, tracking strength in other Asian currencies. The local currency was supported by several positive developments, including foreign fund inflows, a sharp drop in global crude oil prices, and weakness in the US dollar.
At the interbank foreign exchange market, the rupee opened at 84.45, touched a low of 84.47, and strengthened to a high of 84.18, gaining 39 paise from its previous close. This comes after the rupee touched a seven-month high of 83.77 last Friday before pulling back due to suspected RBI intervention.
Let’s look at the key factors supporting the rupee’s recent rise.
Brent crude oil fell nearly 4%, while WTI crude dropped over 3.6%. Brent futures were trading at US$59.24 per barrel. The decline was triggered by OPEC’s decision to increase oil output, adding 411,000 barrels per day to global supply in June.
This drop in oil prices is positive for India, which imports most of its crude. A lower oil import bill helps the rupee strengthen.
Foreign Portfolio Investors (FPIs) turned net buyers in April after 3 months of selling. They invested ₹4,223 crore into Indian stocks in April, including ₹2,769 crore just last Friday.
This fresh interest from foreign investors has improved demand for Indian assets, strengthening the rupee. The newly issued 10-year government bond also saw good demand, supporting further inflows.
The US dollar weakened due to expectations of an interest rate cut by the US Federal Reserve. The dollar index, which tracks the dollar against six major currencies, was down to 99.69.
The euro and the yen also gained against the dollar, adding to the overall weakness in the greenback. A weak dollar usually supports emerging market currencies like the rupee.
India’s Goods and Services Tax (GST) collections hit a record high of ₹2.37 lakh crore in April, up 12.6% year-on-year. This shows strong economic activity.
Also, India’s foreign exchange reserves increased by US$1.98 billion to reach US$688.13 billion, the eighth straight week of growth. These factors boosted confidence in India’s economic stability.
Indian equity markets have been on a strong upward trend, with Sensex and Nifty 50 rising around 7% in the past month. This rally, driven by easing global tensions and strong US jobs data, has attracted foreign investors and further supported the rupee.
The Indian rupee’s recent strength is backed by falling oil prices, rising foreign inflows, a weak US dollar, and strong economic data. Robust stock market performance and steady forex reserves have further lifted market confidence in the currency. This upward trend reflects growing investor optimism and India’s improving macroeconomic stability.
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Published on: May 5, 2025, 4:11 PM IST
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