Continuing its winning streak for the second straight day, the rupee strengthened by 21 paise, or 0.24%, on Friday, driven by a sharp fall in crude oil prices and concerns over a potential recession in the US due to tariffs, which weakened the greenback against major currencies.
Intra-day, the domestic currency rose above 85 against the dollar for the first time this year. The rupee rose to a peak of 84.9450 in early trade, before trimming gains and closing at 85.2350. On Thursday, the rupee had settled at 85.4413 against the US dollar. After appreciating 2.39% in March, the rupee has gained 0.45% so far in April.
While the local currency has strengthened following US President Donald Trump’s announcement of tariffs, experts expect the rupee to face downward pressure in the medium term due to a global economic slowdown.
“Beyond the near-term, return of the depreciation pressures is expected as markets price in the headwinds to the Indian economy from a global growth slowdown,” said Sakshi Gupta, principal economist, HDFC Bank. “However, we do believe that the dollar/rupee pair could perform better than its emerging market peers over the coming months and the extent of depreciation pressures could be lower than we earlier anticipated”.
Weighed down by concerns over an economic slowdown, Brent crude has fallen nearly 13% in the past two sessions. Brent crude, the global oil benchmark, had fallen by nearly 7% on Thursday. Crude oil prices have eased after the decision by the OPEC+ to increase output faster than previously announced.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.42% lower at 101.64.
“Rupee gained for three consecutive weeks, after August 2024, supported by broad-based weakness in the dollar after America’s reciprocal tariff announcement and stable domestic equities. The balance between dollar demand and supply, along with stronger regional currencies, also contributed to the rupee’s appreciation,” said Dilip Parmar, research analyst, HDFC Securities.