The Indian Rupee appreciated by 18 paise to 85.56 against the US Dollar in early trade on Friday, supported by strong foreign inflows into Indian markets. Forex traders attributed the rise to sustained foreign investor interest in Indian equities and bonds, which has seen over $2 billion inflows into stocks and over $3 billion into bonds this month.

Foreign Inflows Support the Rupee

Over the past four days, foreign institutional investors (FIIs) have actively invested in Indian equities, pumping billions of dollars into the market. This influx has provided a much-needed cushion for the Rupee, helping it recover from previous losses. On Thursday, the Rupee had closed at 85.74 per USD, marking a 5 paise drop before making a comeback today.

Global Factors Influencing the Rupee

While the Rupee has strengthened, traders remain cautious about global trade concerns that may impact forex markets. US President Donald Trump recently signed an order imposing a 25% tariff on auto imports, escalating trade tensions and adding pressure on emerging market currencies. However, the US Dollar Index, which measures the greenback against six major currencies, was down 0.03% at 104.30, providing some support for the Rupee.

Oil Prices and Market Trends

Brent crude oil, a key factor affecting India’s import bill, was trading slightly lower at $73.97 per barrel, reducing pressure on the currency. Meanwhile, Indian equity markets witnessed a minor correction, with the BSE Sensex down 165.16 points at 77,441.27 and Nifty declining by 41.55 points to 23,550.40.

Market Expectations and Forex Outlook

Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, noted that the USD/INR pair is expected to trade within a range of 85.60 to 86.00. Additionally, he pointed out that exporters are waiting for better levels to sell USD, which could influence market movements further. With key economic data releases scheduled for March 31, market participants are closely monitoring developments in the forex space.

Foreign Institutional Investments and Trading Volumes

FIIs purchased equities worth ₹11,111.25 crore on a net basis on March 27, as per exchange data. This continued foreign investor confidence in India’s growth story has helped keep the rupee stable despite global uncertainties.

Key Takeaways for Investors

• The Rupee’s appreciation is driven by strong foreign inflows, showing sustained investor confidence in India’s markets.

• Global trade concerns and tariffs imposed by the US could impact forex markets, but for now, the rupee remains resilient.

• Oil price movements and FII trading volumes will play a crucial role in shaping the rupee’s trajectory in the coming weeks.
   

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