Rupee Strengthens 0.5% on Strong Equity Inflows

Mumbai: The Indian rupee appreciated by approximately 0.5 per cent against the US dollar on Monday, closing at 85.0,3 its highest close since December 20, 2024. This strengthening was underpinned by a robust performance in the domestic equity markets, notably with Reliance Industries surging over 5 per cent to a six-month high after beating analysts estimates for quarterly earnings alongside renewed foreign portfolio inflows and investments into Ather Energy Initial Public Offer (IPO).

The rupee was also supported by expectations of inflows if MSCI, the global index provider, rebalances its standard indexes.

Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors, said, “The rupee had ended on Friday at 85.45 and was sold on that day as markets factored in the tensions between India and Pakistan. But with no action taken since the last five days, the market continued to sell dollars helping the rupee rise to 84.9575 before closing at 85.03. Today, FPIs were dollar sellers and mostly buyers of equity.”

“The RBI was present near to 85 level, but with reserves touching almost $ 688 billion and India continuing to be the MFN (most favored nation) for investing, dollar selling continues as we await the details of the Indo-American trade deal, which is still under negotiations and under wraps. Rupee is expected to be in the range of 84.75 to 85.50 tomorrow with risk to the downside of the dollar-rupee pair, added Bhansali.

“Looking ahead, attention will pivot to forthcoming US economic data including the Personal Consumption Expenditure Price Index report and non-farm payrolls which may influence the dollar’s trajectory.

Furthermore, any escalation in geopolitical tensions between India and Pakistan could exacerbate volatility and exert downward pressure on the rupee,” said Abhishek Goenka, founder and chief executive officer at India Forex Asset Management.

The local currency appreciated up to 84.96 per dollar during the day, however, gave up some gains on technical resistance to settle at 85.03 per dollar. On Friday, the rupee had closed at 85.45 against the dollar. The dollar index which measures the strength of the greenback against a basket of six major currencies was down 0.1 per cent at 99.6. The benchmark yield settled at 6.40 per cent, against the previous close of 6.36 per cent.