Rupee hits two-month high of 85.93 against US dollar on fresh inflows, logs biggest weekly gain in over two years

INR vs USD Rate Today: The Indian rupee posted its best day against the US dollar in two months after rising for the sixth straight session on Friday, March 21. US dollar inflows and an unwinding of speculative long-dollar positions also helped the rupee log its best week in more than two years.

The domestic currency appreciated 38 paise to settle at 85.98 against the US dollar, up from 86.3675 in the previous session, driven by a sharp rise in the domestic equity markets and fresh foreign capital inflows. It rose to a 10-week high of 85.9375 during the session and gained 1.2 per cent in the week.

The Indian rupee also emerged as the top-performing Asian currency so far in March 2025 and surged above the 86-mark for the first time since January.

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At the interbank foreign exchange, the rupee opened at 86.26 to hit an intraday high of 85.93 and a low of 86.30 against the greenback. The unit ended the session at 85.98, registering a gain of 38 paise from its previous closing level. This is the sixth straight session of gain for the rupee, during which it has added 123 paise.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was 0.19 per cent higher at 104.04. On Thursday, the rupee stayed flat and appreciated one paisa to close at 86.36 against the US dollar.

INR vs USD Rate Today: What drove the domestic currency?

FTSE rebalancing: Traders said that large foreign banks were privy to a major flow this week and have been on offer for the dollar/rupee pair. Equity inflows related to rebalancing the FTSE's All-World Index also likely boosted the rupee. The rebalancing, which will take effect from Friday, is expected to garner $1.5 billion in inflows.

Foreign capital inflows: Foreign portfolio investors, who have been sellers of Indian equities since late last year, turned buyers in two of the last four market sessions. The flows helped the rupee sidestep the weakness in Asian currencies. Most Asian currencies declined.

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RBI currency swap: "The rupee's gain was supported by stronger-than-expected trade data and a rise in foreign exchange reserves following the Reserve Bank of India (RBI)'s USD/INR swap intervention. These factors together have helped bolster the local currency," said Dilip Parmar – Senior Research Analyst at HDFC Securities.

Equity markets: The Nifty 50 logged its largest weekly rise in more than four years on signs that foreign investors are returning. As investors bet, the blue-chip indexes have bottomed out after a record slump. The Nifty 50 gained 0.69 per cent to settle at 23,350.4, while the BSE Sensex rose 0.73 per cent to 76,905.51, both six-week closing highs. They rose 4.2 per cent during the week.

INR vs USD Rate Outlook

“Rupee strengthened with a sharp rise of ₹0.40 or 0.46 per cent at 85.94, as foreign inflows surged with strong buying figures. The US Fed's decision to hold rates steady and its forecast for lower interest rates ahead pulled the dollar down, providing significant support to the rupee,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

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"However, major capital market strengthening gives the rupee a stronger push. With capital flows improving and dollar weakness persisting, the rupee range shifts to 85.65-86.30, with further movement dependent on global risk sentiment and market flows," added Trivedi.

According to Dilip Parmar, Senior Research Analyst at HDFC Securities, the Indian rupee has strengthened past the 86 mark against the US dollar index for the first time since January 2025, driven by a surge in foreign investments in the domestic capital and debt markets.

According to the currency analyst, the central bank's efforts have paid off, with the rupee emerging as the top performer among Asian currencies so far this month. “In the near term, spot USD-INR has support at 85.70 and resistance at 86.45,” said Parmar of HDFC Securities. According to analysts, if the rupee fails to breach the 85.90 mark, it will likely face depreciation pressure, with immediate support expected in the 86.80 to 87.00 range.

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