The Indian rupee is poised to show minimal movement on Friday, despite the dollar index’s recent uptick. This stability is largely attributed to ongoing inflows from foreign banks, which are expected to support the rupee’s upward trajectory for the week. Following a strong performance, the rupee is anticipated to open flat or slightly higher against the U.S. dollar, having closed at 86.3675 in the previous trading session.
Rupee’s Remarkable Performance
This week has seen the rupee strengthen by 0.7%, bringing its overall gains for March to over 1%. This impressive rise positions the rupee as the top-performing major currency in Asia for the month. The surge has been fueled by dollar sales from foreign banks, driven by significant client flows.
- Rupee’s Recent History:
- It faced challenges in previous months due to foreign equity outflows and hedging activities from importers.
- In February, the rupee hit a historic low of 87.95 against the dollar, marking a troubling phase for the currency.
Despite this recent success, experts caution that the rupee may face challenges ahead. A currency trader from a Mumbai bank noted, “I believe 86 is the crucial support level for the dollar/rupee exchange rate. It would surprise me if we see a consistent drop below this mark.”
Dollar Index Trends
On Thursday, the dollar index exhibited a rebound, inching closer to the 104 threshold during trading in Asia. The dollar has encountered difficulties lately, primarily due to concerns over a potential U.S. economic slowdown and a strong euro rally.
The Federal Reserve’s latest economic projections, released earlier this week, have lowered growth expectations for the U.S. in 2025 and 2026. They also reiterated plans for two rate cuts in 2025, aligning with their guidance from December.
Key Market Indicators
- One-month non-deliverable rupee forward: 86.56
- Onshore one-month forward premium: 24.5 paisa
- Dollar index: steady at 103.86
- Brent crude futures: up 0.3% at $72.20 per barrel
- Ten-year U.S. note yield: 4.24%
Additionally, data from the National Securities Depository Limited (NSDL) highlights mixed activity in the Indian markets:
- Foreign investors sold a net $119.2 million worth of Indian shares on March 20.
- Conversely, they purchased a net $352.8 million in Indian bonds the same day.
With these developments, the Indian rupee’s journey appears to be one of cautious optimism, balancing between foreign inflows and the broader economic landscape.
