Source: The Global Kashmir
In early trading on Monday, the Indian rupee strengthened by 16 paise to 85.41 against the U.S. dollar. The rupee’s rise was stoked by a weak U.S. currency in the global market and a healthy inflow of foreign funds.
Opening Movement
In the interbank foreign exchange market, the rupee opened at 85.43 and slowly gained ground, reaching a bid of 85.41, a rise of 16 paise against its previous close of 85.57. The local currency also has a low bid of 85.61 against the dollar during initial trade.
Main Factors Supporting the New Strength of the Rupee
Forex traders attributed the strong rupee to:
- A weaker U.S. dollar externally,
- Continued stability in foreign institutional investments and
- Lower crude oil prices amid an oversupplied global market.
- The dollar index, which measures the dollar’s strength relative to six major currencies, moved down 0.28% to 100.81.
- Brent crude, the international oil benchmark, dropped 0.43% to $65.13 per barrel (futures trade).
Expert View
Amit Pabari, MD at CR Forex Advisors, said, “The pair is expected to trade in the 85–85.80 range. If the dollar dips due to concerns from the U.S. credit rating downgrade, the rupee could see some upside. Steady foreign inflows may also help support the currency,”.
However, he added “Compounding the pressure, crude oil prices remain elevated, with Brent hovering around $65 per barrel. As one of the world’s largest oil importers, India faces the dual challenge of a widening trade deficit and increased dollar demand — factors that could further strain the rupee,”
Market Sentiment and External Factors
Investors remain cautious due to:
- Moody’s recent downgrade of the U.S. investment-grade rating,
- Ongoing U.S.-Iran nuclear deal talks,
- Awaited China factory data.
- These global developments are keeping currency markets on edge.
Domestic Markets and Reserves
In the domestic equity market, the 30-share BSE Sensex slipped by 123.76 points (0.15%) to settle at 82,206.83, while the Nifty dropped 29.70 points (0.12%) to close at 24,990.10.
Despite the cautious mood, foreign institutional investors (FIIs) bought equities worth ₹8,831.05 crore on Friday, showing confidence in Indian markets.
India’s foreign exchange reserves have also risen by $4.553 billion to $690.617 billion for the week ending May 9, largely due to an increase in gold reserves. This gives the Reserve Bank of India (RBI) more headroom to absorb volatility in the currency markets.
Last week, total reserves declined by $2.065 billion, bringing total reserves to $686.064 billion. Comparison: total foreign exchange reserves peaked at $704.885 billion at the end of September 2024.
