The Indian rupee has achieved a remarkable turnaround, strengthening by 37 paise to settle at 85.61 against the US dollar on Monday. This marks the seventh consecutive session of gains for the rupee, completely erasing its losses for the year 2025. The positive momentum can be attributed to rising domestic equity markets and increased foreign capital inflows, creating a favorable environment for the local currency.

Factors Behind the Rupee’s Rise

Several elements contributed to this significant appreciation of the rupee:

• Lower Global Crude Prices: The decline in crude oil prices has eased inflationary pressures, boosting investor confidence.
• Weakness of the Dollar: A dip in the greenback’s strength has also played a role in enhancing the rupee’s position.
• Positive Market Sentiment: The local equity market’s robust performance has further strengthened the rupee’s resilience.

Traders indicated that despite these positive trends, challenges such as liquidity issues and potential reciprocal tariffs remain concerns for the currency.

Intraday Performance of the Rupee

At the interbank foreign exchange market, the Indian rupee opened at 85.93, achieving an intraday high of 85.49 and a low of 86.01 against the dollar. Ultimately, it closed at 85.61, reflecting a cumulative gain of 154 paise over the last seven sessions. Notably, the rupee had previously experienced a record low of 87.59 against the dollar last month.

Dilip Parmar, a Research Analyst at HDFC Securities, commented on the rupee’s recovery, stating, “The Indian rupee regained ground as foreign banks and exporters increased dollar sales ahead of the financial year-end adjustments.” He noted that the positive sentiment was also fueled by upcoming visits of US representatives to India regarding tariff discussions.

Key Market Indicators

• Dollar Index: The dollar index, which measures the greenback’s strength against a basket of currencies, was down 0.09% at 103.99.
• Brent Crude: The global oil benchmark, Brent crude, saw a slight increase of 0.54%, trading at approximately USD 72.55 per barrel.

In the domestic equity sector, the BSE Sensex soared by 1.40%, gaining 1078.87 points to reach 77,984.38, while the Nifty rose by 1.32%, closing at 23,658.35 points.

Foreign Capital Inflows and Forex Reserves

Foreign Institutional Investors (FIIs) have shown a strong interest in Indian equities, purchasing shares worth Rs 3,055.76 crore on a net basis on Monday. Additionally, India’s foreign exchange reserves increased by USD 305 million, reaching USD 654.271 billion as of the week ending March 14. This increase was aided by a USD 10 billion forex swap conducted by the Reserve Bank of India.

The Indian equity market has experienced a reduction in selling pressure from Foreign Portfolio Investors (FPIs), with outflows dropping to Rs 1,794 crore (around USD 194 million) last week. This improvement in sentiment is largely driven by easing global concerns and optimism surrounding the potential de-escalation of the ongoing Russia-Ukraine conflict.

As the rupee continues to gain strength, market participants remain vigilant about upcoming economic developments and geopolitical factors that could influence currency movements in the near future.