The Indian Rupee made a significant leap, surging 33 paise to close at 85.46 against the US Dollar on Friday, March 28, 2025, marking its highest level in three months. The sharp appreciation was driven by strong foreign fund inflows, even as weak domestic markets and a firm US Dollar exerted pressure.

Rupee Records Biggest Monthly Gain in Six Years

The rupee gained 2.17% in March, making it the largest monthly rise since November 2018. However, despite this strong performance, the local currency has weakened over 2% in FY25, having started the financial year at 83.42 per dollar on April 2.

Foreign Inflows Boost the Rupee

A major factor behind the rupee's appreciation has been the massive foreign inflows into Indian markets. Over the past six trading sessions, foreign institutional investors (FIIs) have invested more than ₹32,000 crore, significantly supporting the rupee's rally. However, the gains were partially capped by month-end dollar demand from importers and oil marketing companies (OMCs).

At the interbank forex market, the rupee opened at 85.64, touched an intraday high of 85.40, and hit a low of 85.70, before finally settling at 85.46. This was a strong rebound after the previous session’s close of 85.74, where the rupee had weakened by 5 paise.

Analyst Outlook: Positive Bias with Caution

Market experts, including Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, expect the rupee to trade with a positive bias in the coming sessions, supported by continued foreign inflows. However, elevated crude oil prices and month-end dollar demand from businesses may limit further appreciation.

Global Factors Impacting Rupee

The US Dollar Index edged up by 0.09% to 104.43, reflecting strength in the global currency market. Meanwhile, Brent crude prices rose 0.16% to $74.15 per barrel, adding pressure on the Indian currency.

The Indian equity markets also ended the session lower, with the BSE Sensex slipping 191.51 points to 77,414.92, while the Nifty fell by 72.60 points to 23,519.35.

Foreign Institutional Investors Continue Buying Spree

Foreign institutional investors (FIIs) remain bullish on Indian markets, buying ₹11,111 crore worth of equities on Thursday, March 27, 2025, as per exchange data. This persistent buying activity has been instrumental in boosting the rupee's performance.

With market dynamics showing strong foreign inflows and positive investor sentiment, the rupee may continue its upward momentum. However, factors like rising crude oil prices, month-end dollar demand, and global economic conditions will play a crucial role in determining the rupee’s trajectory in the coming weeks.

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