The Indian rupee has continued its positive momentum, appreciating by 21 paise or 0.24% on Friday. This advancement comes as a direct result of a significant decline in crude oil prices and rising apprehensions about a possible recession in the United States, which has weakened the dollar against numerous currencies.
Rupee Surges Against the Dollar
During intra-day trading, the rupee crossed the 85 mark against the US dollar for the first time this year. It peaked at 84.9450 early in the session before settling at 85.2350, down from 85.4413 the previous day. After a notable 2.39% appreciation in March, the rupee has gained an additional 0.45% thus far in April.
- Key Highlights:
- Rupee’s peak: 84.9450
- Closing rate: 85.2350
- Previous day’s rate: 85.4413
- March appreciation: 2.39%
- April gain: 0.45%
Economic Factors Influencing Currency Strength
The local currency’s recent strength can be attributed to US President Donald Trump’s tariff announcements, which have led to a weaker dollar. However, experts caution that the rupee may experience downward pressure in the medium term due to a looming global economic slowdown.
Sakshi Gupta, a principal economist at HDFC Bank, noted, “While the immediate outlook is positive, we anticipate that depreciation pressures will return as markets adjust to the challenges facing the Indian economy amid global growth concerns. Nonetheless, we expect the dollar/rupee exchange rate to perform better than many emerging market currencies in the coming months, with less depreciation than previously forecasted.”
Crude Oil Prices Decline
In the backdrop of these currency movements, Brent crude has dropped nearly 13% over the past two trading sessions, including a 7% decrease on Thursday. This decline follows OPEC+’s decision to increase oil output faster than initially planned, easing some inflationary pressures on the economy.
- Brent Crude Insights:
- Total decline: 13% in two sessions
- Thursday’s drop: 7%
- OPEC+ decisions impacting prices
Dollar Index and Market Sentiment
The dollar index, which reflects the US currency’s strength against a basket of six other currencies, was down by 0.42%, trading at 101.64. Dilip Parmar, a research analyst at HDFC Securities, commented, “The rupee has gained for three consecutive weeks since August 2024, boosted by widespread dollar weakness following the tariff announcements and stable domestic equity markets. The interplay between dollar demand and supply, alongside stronger regional currencies, has supported the rupee’s appreciation.”
With evolving global economic conditions, market participants will be closely monitoring further developments that may impact the rupee’s performance in the weeks to come.
