The rupee rose 31 paise, or 0.37%, to 84.2475 against the US dollar on Monday, driven by a decline in crude oil prices. Brent crude prices plunged by up to 4.55% to $58.5 on Monday after the OPEC+ agreed to a further increase in output over the weekend, spurring concerns about a glut of supply into an uncertain demand environment.
“Rupee strengthened after a highly-volatile trading session on Friday, underpinned by persistent overseas investment in domestic stocks and renewed appetite for risk-driven assets,” said Dilip Parmar, research analyst, HDFC Securities. “The currency also drew support from a softening US dollar and easing crude oil prices, which bolstered the sentiment in both the Indian bond and rupee.”
On Friday, the rupee witnessed high volatility as it hit a seven-month high and rose past the 84-level intra-day, but pared all gains to settle 3 paise lower at 84.57 against the greenback.
“One of the key factors that gave a psychological boost to the rupee move was the fall in Brent crude oil prices as global worries from the US-China trade war have been putting pressure on demand,” Kanika Pasricha, chief economic adviser at Union Bank of India, said. “Though we still claim buy on dips for dollar-rupee, we believe that the sentiment for the domestic currency has turned more favourable in recent weeks.”
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading lower by 0.26% at 99.76.
“We expect the USD/INR pair to stabilise in the range (of) 85-87 for 2025. The domestic impact of tariffs on the dollar will be visible in 2025, which will support the rupee,” SBI Research said in a note on Monday.
Dollar-rupee forward premiums fell, with the one-year implied yield down 9 basis points at 2.18%.
Slimmer chances of a rate cut by the Federal Reserve in June and the rupee’s recent string of gains have weighed on far-forward premiums, traders said.
A pick-up in portfolio inflows and cutting of bearish bets boosted the rupee by about 2% over the last four weeks.
“The RBI is conducting aggressive open market operations, with Rs 1.25 lakh crore in bond purchases scheduled for May to manage liquidity,” said Amit Pabari, MD, CR Forex Advisors. While forex reserves rose to $688.13 billion for the week ended April 25, mostly due to higher foreign currency assets, the rupee’s appreciation may be limited due to continued RBI intervention, he added.