The rupee surged 33 paise to close at 85.4625 against the US dollar on Friday, marking its highest level in three months, helped by strong foreign fund inflows.
The domestic currency also recorded its biggest monthly gain in over six years, appreciating 2.17% in March, the highest since November 2018. Foreign portfolio investors (FPIs) net bought equities worth Rs 18,130 crore during the week.
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“Breaking above 86.00, the rupee has erased its year-to-date losses, benefiting from a resumption in foreign inflows into the equity as well as debt markets, helped also by a likely current account surplus in 1Q25,” said Radhika Rao, executive director and senior economist, DBS Bank. “The currency’s relative underperformance between December 2024 and early- Mar 2025 had helped arrest its overvaluation on the real effective exchange rate (REER) basis.”
Rupee REER returned to its long-term average range in February 2025 (at 102.40) versus a record high of 108.1 in November 2024, suggesting that the rupee is more evenly valued now versus the past few years, Rao said.
While the currency has appreciated on a monthly basis in March, it has declined during the financial year. The rupee has weakened 2.5% in the current financial year. In absolute term, the currency has depreciated by 206 paise as it had started FY25 at 83.4037 per dollar.
“There seems to be more rupee demand as we approach the financial year-end,” said Kunal Sodhani, vice president, Shinhan Bank. “Banks that have excess dollars try to trade them for rupee before the year ends.”
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At the interbank foreign exchange market, the rupee opened at 85.6628 before reaching an intraday high of 85.4063. It ended the day at 85.4625, registering a gain of 0.38%.
The dollar index, which measures the US currency against a basket of six major currencies, was up 0.09% at 104.43. Brent crude futures, the global oil benchmark, edged up 0.16% to 74.15 dollar per barrel.
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