The Indian rupee made a significant leap in early trading on Friday, surpassing the 84 per U.S. dollar mark for the first time since October 2024. This surge was largely fueled by substantial dollar sales from foreign banks and a boost in regional currencies. The rupee hit a high of 83.83, reflecting a 0.7% increase from its previous close of 84.4875. Notably, the currency has appreciated nearly 2% this week.

Factors Behind the Rupee’s Rise

Several factors have contributed to the rupee’s upward trajectory:

• An increase in dollar inflows into Indian equities.
• Optimism surrounding a possible U.S. trade deal.
• The liquidation of short positions against the rupee.

Traders have indicated that these elements have combined to create a favorable environment for the rupee.

Foreign Investment Trends

A notable trend has emerged as foreign institutional investors have consistently purchased Indian shares for 11 consecutive sessions—the longest influx of capital in two years. This sustained interest reflects growing confidence in the Indian market.

Analysts Reassess Predictions

With the rupee’s impressive gains, market analysts are reevaluating their forecasts. MUFG has revised its expectations, projecting the currency will finish the year at 84, a significant change from its earlier prediction of 87. Their revised outlook suggests that the rupee is poised to outperform other Asian currencies, especially given anticipated U.S. dollar weakness and favorable tariff outcomes for India under a potential Trump administration 2.0.

Market Dynamics on the Day

On the trading floor, foreign banks were seen actively selling dollars, likely for custodial clients, while demand remained relatively low. This dynamic allowed the rupee to confidently breach the 84 threshold, according to a trader from a state-run bank.

Conclusion

In summary, the Indian rupee’s recent performance highlights a shift in market sentiment and investment dynamics. As foreign capital continues to flow into Indian equities and analysts adjust their forecasts, the outlook for the rupee appears increasingly optimistic. For those following currency trends, this development signals a potentially exciting period ahead for the Indian economy.