The rupee rose to a two-month high on Thursday, advancing 26 paise to 86.185 against the US dollar helped by a weaker greenback and gains in domestic equities. Today’s rise marked the fifth consecutive session of gains for the rupee, making it the longest rally in nearly five months. The local currency has gained 85 paise, or 0.97%, over the past five days, making it the top performer among Asian peers.
Due to weakness in the dollar, the rupee is “playing catch-up” with it, said Anindya Banerjee, head of research for currencies and commodities at Kotak Securities.
The US dollar index, which tracks the US currency’s value against six of its major peers, is hovering close to its lowest level this year at 103.38. Experts said the appreciation in the rupee was due to inflows in the bond market, improved economic data and cooling crude prices.
The rupee closed at 86.3675 against the US dollar on Thursday compared to 86.4413 on Wednesday, making it the highest single-day rise since January 24.
Dollar index has weakened considerably since US President Donald Trump assumed office, Madhavankutty G, chief economist, Canara Bank, said, adding, “While the index was hovering in the 107-108 levels coinciding with spike in US treasury yields, tariff threats and trade wars, it has lost all gains and now looks range bound between 103-103.5 as a potentially stagflationary scenario looms large.”
The latest rally helped the rupee emerge as the best performing currency in Asia in the past five sessions. It gained 0.97% while Thai baht rose 0.47%, followed by Philippine peso (0.26%) and Malaysian ringgit (0.06%). Other Asian currencies such as South Korean won, Chinese renminbi, Taiwanese dollar, Indonesian rupiah and Japanese yen have depreciated in the past five sessions.
The decline in dollar has been triggered by concerns of a US economic slowdown. The Federal Reserve on Wednesday lowered its 2025 GDP projections while increasing its inflation expectations. Concerns about Trump’s tariff policies have dented investor confidence about the US economy and the dollar.
The recent rally marks a significant reversal for the rupee, which was under sustained pressure until mid-February due to equity outflows and a slowdown in domestic growth. It depreciated by 0.9% month-on-month during February 2025, weighed down by heavy FPI outflows. The RBI has been intervening in the market to defend the rupee. The RBI sold net $11.14 billion in the spot foreign exchange market in January, according to its monthly bulletin. In December, the RBI had sold a net of $15.15 billion in the spot market.
