The Indian rupee achieved its strongest level in 2025, climbing 27 paise to close at 84.96 against the US dollar in early trade on Tuesday, April 29. This impressive move was largely fueled by steady foreign inflows, upbeat domestic economic data, and a calmer global environment.

Opening Dynamics and Intraday Movements

The rupee opened at 85.06 at the interbank foreign exchange market and displayed resilience throughout the session. It momentarily slipped to an intraday low of 85.15 before regaining strength, showing how underlying market sentiment remains optimistic.

Key Drivers Behind the Rupee's Rise

Several factors played a crucial role in boosting the rupee's performance:

• Strong Economic Indicators: India’s manufacturing and industrial output increased by 3% in March, signaling a firm domestic demand environment.

• Robust Foreign Institutional Investment: On April 28, Foreign Institutional Investors (FIIs) were net buyers, picking up Indian shares worth approximately ₹2,474 crore, strengthening equity markets and, consequently, the rupee.

• Calmer Global Tensions: Recent developments in the global arena have also been favorable. Notably, US Treasury Secretary Scott Bessent highlighted positive diplomatic engagements with India and Japan, and China’s move to ease auto import rules helped lower the risk of an all-out trade war.

Equity Rally Providing Tailwinds

The stock market's rally, led by foreign investors, significantly contributed to the rupee's strength. A stronger stock market generally leads to a stronger currency, as it reflects higher confidence in the economy and greater foreign fund inflows.

Warning Signs Amid Optimism

While the currency's upward momentum is encouraging, traders remain cautious. Geopolitical tensions, particularly between India and Pakistan, continue to pose risks. Historically, such tensions have quickly reversed gains in the rupee, and hence market participants remain vigilant.

Global Economic Environment Impact

A softer diplomatic tone globally is another factor supporting the rupee.

• China’s recent move to offer tariff exemptions and reduce restrictions on auto imports is a deliberate step to lower trade tensions.

• These actions are helping stabilize global supply chains, which were previously under immense pressure due to escalating trade wars.

According to Amit Pabari, MD, CR Forex Advisors, "The steps taken by China are helping avoid a full-blown trade war and are easing pressure on global supply chains," thereby boosting emerging market currencies like the rupee.

Other Market Movements

Despite the rupee's surge:

• The US dollar index edged up by 0.17% to 99.18, showing slight strengthening of the greenback.

• Brent crude futures slipped by 0.68% to $65.41 per barrel, providing further relief to India, which imports the majority of its oil needs.

Looking Ahead

The outlook for the rupee remains cautiously optimistic. Strong domestic growth, combined with supportive global cues, is expected to keep the rupee relatively stable in the near term. However, geopolitical risks and volatile global commodity prices could inject some uncertainty into the market.

Conclusion

The rupee's climb to 84.96 per US dollar marks an important milestone in 2025, reflecting a combination of solid economic fundamentals, strong investor confidence, and improving global sentiment. Traders and investors will be closely watching upcoming economic data releases, central bank signals, and geopolitical developments to gauge the rupee's future trajectory.

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