Rupee rallies to multi-year highs as global momentum boosts emerging currencies
USD/INR drops on lower oil, risk-on sentiment and India equity strength
The USD/INR pair has dropped to around 85.48, marking its strongest weekly performance since January 2023 after crude oil prices tumbled over 11 % post-Middle East ceasefire and U.S. markets favored risk assets. Indian equities and FII inflows further buoyed the rupee.
Dollar weakness and RBI's strategic play support the rally
The U.S. Dollar Index fell to three-year lows, down about 1.5 % this week amid concerns over Fed independence and subpar economic data, reinforcing rate cut expectations. The RBI's recent liquidity absorption via reverse repo and short-dollar operations also helped stabilize the currency.
Limited upside for now as structural headwinds persist
Rupee gains may face headwinds due to persistent dollar demand from importers and state banks. Market attention turns to U.S. inflation reports and upcoming RBI announcements, which are set to influence USD/INR's trading band between 85.35 and 86.40.