Mumbai– The Indian rupee opened 75 paise stronger at 84.65 against the U.S. dollar on Tuesday, up from its previous close of 85.38. Analysts projected the day’s trading range to fall between 84.50 and 85.25.
The U.S. dollar maintained its recent strength following a major trade breakthrough between the United States and China. As part of the agreement, the U.S. will reduce tariffs on Chinese goods from 145% to 30% for a 90-day period, while China will lower its tariffs on American products from 125% to 10%. Both nations also agreed to establish a mechanism for ongoing dialogue on trade and economic relations.
Market experts noted that further geopolitical developments could significantly influence the rupee’s movement in the near term.
During FY25, the rupee traded within a range of 83.10 to 87.60 per dollar. It initially weakened in the wake of the U.S. election results and depreciated by 2.4% over the fiscal year, largely due to persistent foreign portfolio investment (FPI) outflows and a stronger dollar.
Despite these pressures, the rupee demonstrated relative stability compared to other global currencies, supported by robust government finances, a narrowing current account deficit, improved liquidity conditions, and softening global oil prices, according to the National Stock Exchange’s Market Pulse Report for April.
By March 2025, a reversal in dollar strength and renewed FPI inflows into Indian debt markets helped the rupee recover, registering a 2.4% appreciation for the month.
The rupee’s average annualized volatility fell to 2.7% in FY25, placing it among the least volatile major emerging market currencies. This reflected India’s strong external buffers and effective foreign exchange management.
However, the report noted that the rupee remained overvalued, with the 40-currency trade-weighted Real Effective Exchange Rate (REER) rising to 105.3. Both the REER and Nominal Effective Exchange Rate (NEER) showed signs of gradual moderation in the second half of FY25, suggesting an easing of overvaluation pressures. Additionally, the one-year forward premium for the rupee continued to decline, signaling shifts in market sentiment and reaffirming India’s macroeconomic resilience. (Source: IANS)
