On Tuesday, the Indian rupee’s impressive nine-day winning streak came to an end as importers took action to safeguard their liabilities at favorable exchange rates. The local currency settled at 85.7550 against the U.S. dollar, marking a decline of 0.14% for the day. This dip follows a recent peak of 85.49, reached just a day prior, and reflects a 2% increase in value for the month.
Rupee’s Performance and Market Influences
Despite the minor setback, the rupee has shown resilience this month, aided by intermittent inflows from overseas portfolio investors and the repatriation of corporate dollar earnings ahead of the fiscal year-end on March 31. These factors have allowed the rupee to outperform its Asian counterparts, providing a much-needed boost after a series of record lows earlier this year.
- Current Exchange Rate: 85.7550 INR/USD
- Monthly Gain: 2%
- Recent Peak: 85.49 INR/USD
Expert Insights on Future Projections
In a recent note, MUFG adjusted its outlook for the rupee from ‘cautious’ to ‘neutral,’ now anticipating it will finish the calendar year 2025 at 87.50. This is an improvement from their earlier estimate of 88.50. However, they caution that potential risks could lead to a decline in the rupee’s value, highlighting concerns over U.S. tariffs, slower growth, a potential rise in inflation, and ongoing pressure on other Asian currencies.
- MUFG’s New Forecast: 87.50 INR/USD by 2025
- Previous Forecast: 88.50 INR/USD
Market Trends and Economic Indicators
As of the latest data, the dollar index stood slightly higher at 104.3, with Asian currencies experiencing a downturn between 0.1% to 0.3%. Forward premiums for the dollar-rupee pair also increased, with the 1-year implied yield reaching a one-month high of 2.23% following the Reserve Bank of India’s recent $10 billion FX swap auction announcement.
Looking ahead, investors are keenly awaiting U.S. consumer confidence reports and comments from Federal Reserve officials, which could further influence market dynamics.
In summary, while the Indian rupee’s recent performance has been commendable, market experts advise caution as various factors may affect its trajectory in the coming months.
