The rupee is literally on a roll. The currency is up nearly 1% intra-day and has breached the psychologically important 84/$ levels. These levels were last seen in June 2024. The currency has now wiped out all losses since Donald Trump won the US Presidential elections in November 2024. Traders are citing strong dollar inflows and short-covering amid rising hopes of a U.S.-India trade deal.
The rupee rose to a peak of 83.78 in early trading, up 0.8% on the day. The currency was at 83.93 per U.S. dollar at 10:35 a.m. IST. The Indian currency, which has risen nearly 2% so far this week. The rupee had slipped to all-time low of 87.95 in February amid uncertainty over Trump’s tariff policies, but recovered sharply over March and April on the back of portfolio inflows and hopes that India will be one of the first to sign a trade deal with the U.S.
The latest report on Reuters indicated that there has been “short covering on reports of how a trade deal will route manufacturing to India mostly,” a Singapore-based trader at a hedge fund said. Exporters’ dollar sales and a scaling back of bearish wagers on the rupee have also helped. In fact, investors have ramped up bullish wagers on the rupee, alongside most of its regional peers, per a Reuters poll.
FII buying continues for 11th straight session
One of the key reasons for the currency gaining strength is the continuous inflows by foreign investors. They have been net buyers for the 11th straight session in Indian equities. This is the the longest run of inflows in two years. The lack of aggressive dollar buying by India’s central bank has also aided, traders said. But the Reserve Bank of India had defended these levels sternly last year and there is a “strong chance” they start to buy dollars now, the trader at the hedge fund said.
Dollar Index weak
The dollar’s relative weakness has also helped the Indian currency. It has come off significantly from its January highs of 110 and is hovering aroudn the 100 mark. Meanwhile Asian currencies were mostly stronger with the offshore Chinese yuan up 0.3% amid fresh hopes of U.S-China trade talks.
With inputs from Reuters
