The Indian rupee kicked off Tuesday with a bang, opening near a three-month high against the US dollar and erasing all its losses for the year. Despite a rising dollar index, strong foreign inflows into domestic equities and bonds kept the rupee resilient, signaling renewed investor confidence.
Rupee’s Resilient Comeback
The rupee opened at 85.58 against the greenback, holding steady at 85.64 later in the session — a level last seen on December 31, 2024. This marks a significant turnaround for the currency, which had been under pressure earlier in the year.
Currency analysts credited this revival to foreign institutional investors (FIIs) ramping up their buying in Indian equities and bonds. The uptick in foreign money inflows counteracted the rising US dollar index, which gained momentum over the past two sessions. Yet, the rupee held its ground, reflecting solid underlying demand for Indian assets.
A Market-Driven Rally
What’s fueling this sudden rebound? It’s a combination of factors — but at the forefront is India’s equity market strength. FIIs, who were cautious in the early months of 2025, are now returning with gusto.
- Strong corporate earnings reports
- Optimism around economic reforms
- A steady decline in global oil prices, reducing India’s import bill
Together, these factors have created a supportive environment for the rupee. Additionally, bond yields remained attractive, luring in more overseas capital.
“Foreign inflows have clearly reversed the sentiment,” said a senior currency strategist at a leading brokerage. “The rupee’s strength is a reflection of renewed confidence in India’s growth story.”
Global Headwinds? No Problem
Interestingly, the rupee’s climb comes despite global headwinds. The US dollar index — a measure of the greenback against major currencies — rose over the last two trading sessions. Typically, a stronger dollar weighs on emerging market currencies like the rupee.
Yet, India’s currency defied the trend. Analysts believe the rupee’s upward momentum reflects the market’s belief that India’s economic fundamentals remain sound, even amid global volatility.
“Markets are pricing in continued resilience,” said Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services. “We’re seeing FIIs buying not only equities but also bonds, which supports the rupee.”
Numbers Tell the Story
Let’s break it down with some numbers:
| Date | Rupee Opening | Rupee Closing | Dollar Index |
|---|---|---|---|
| Dec 31, 2024 | 85.61 | 85.58 | 103.2 |
| Mar 24, 2025 | 85.64 | 85.64 | 104.1 |
| Mar 25, 2025 | 85.58 | 85.64 | 104.5 |
The rupee’s resilience stands out against a rising dollar index, a rare feat in the currency markets.
Outlook: Can the Rupee Hold?
The big question now — can the rupee sustain this momentum?
Market watchers say a lot depends on external factors like US Federal Reserve policy, global oil prices, and geopolitical stability. However, the inflow of foreign capital into Indian assets remains a crucial support.
“If FIIs continue their buying spree, the rupee could test 85.50 levels,” said a currency expert from Anand Rathi. “But a pullback in global markets or a sudden rise in oil prices could reverse the trend.”
For now, the rupee’s resurgence offers a sigh of relief — for traders, businesses, and policymakers alike.
