In a noteworthy shift, the Indian rupee strengthened against the US dollar, closing at 85.43 on Thursday, a gain of seven paisa from the previous day. This increase comes as the dollar index plummeted to a six-month low of 101.5. Initially opening at 85.77, the rupee’s upward momentum throughout the day surprised many traders.
Factors Influencing the Rupee’s Strength
The shift in the dollar’s safe-haven status has been attributed to growing concerns about US trade policies impacting economic growth. A trader from a private bank commented, “The dollar is losing its allure as traders rethink its stability amid changing trade dynamics.” This sentiment contributed to the rupee’s appreciation.
Recent Tariff Announcements
On Wednesday, President Donald Trump unveiled a 26% tariff on imports from India, set to take effect on April 9. While this decision raised concerns, analysts believe the tariffs are less severe compared to those faced by other competing Asian economies. Kunal Sodhani, head of forex and rates treasury at Shinhan Bank India, suggested, “The dollar index could potentially test the 100.60 mark. The initial depreciation of the rupee was merely a knee-jerk reaction, leading to its subsequent recovery.”
Market Dynamics
The rupee’s resilience was bolstered by significant inflows into Indian debt markets, coupled with moderate dollar sales from oil companies. Traders noted that the Reserve Bank of India seemed to play a minimal role in trading activities throughout the day.
- Rupee closing rate: 85.43 to the dollar
- Dollar index low: 101.5
- Initial rupee rate: 85.77
- Expected trading range: 85.00 to 85.70
Anil Bhansali, head of treasury at Finrex Treasury Advisors, remarked, “When the rupee hit 85.50 per dollar, oil companies stepped in to buy dollars, causing a brief dip. However, the currency quickly recovered thanks to stronger debt inflows.”
Future Projections
Traders now eye the upcoming non-farm payroll data from the US, scheduled for release on April 4. This critical data will be instrumental in assessing potential interest rate cuts by the US Federal Reserve, which could further influence the rupee’s trajectory.
As market participants remain vigilant, the rupee’s performance will continue to reflect broader economic trends and geopolitical developments.
