INR vs USD: Rupee at multi-month high against US dollar; FPI inflows, crude oil prices drop, among 5 key factors

Rupee appreciated against the US dollar on Monday, tracking strength in other Asian currencies. The currency was buoyed by foreign fund inflows into domestic markets and a sharp decline in global crude oil prices.

At the interbank foreign exchange market, the rupee opened at 84.45, touched an early low of 84.47, and strengthened to a high of 84.18 against the greenback, registering a gain of 39 paise over its previous close. 

On Friday, the rupee had surged to a seven-month high of 83.77—briefly breaching the 84-per-dollar mark—before paring gains amid suspected dollar-buying intervention by the Reserve Bank of India (RBI).

Meanwhile, the US dollar index was trading just below the 100 mark at 99.69, weighed down by market expectations of a potential interest rate cut by the Federal Reserve in June.

“The Indian rupee extended its positive momentum today, supported by foreign inflows, declining crude prices, and optimism surrounding a potential US-India trade agreement. Markets are now focused on the upcoming Federal Reserve meeting on May 6–7. While rates are likely to remain unchanged, comments from Fed Chair Jerome Powell could provide policy direction,” said Jigar Trivedi, Senior Research Analyst, Reliance Securities.

Geopolitical tensions remain a key monitorable but have had limited immediate impact, Trivedi added.

Five Key Factors Supporting the Rupee’s Rise

1. Sharp Decline in Crude Oil Prices

Brent crude futures slumped nearly 4% after OPEC signaled an increase in oil production in the coming months. Brent oil fell 3.34% to $59.24 per barrel, while US West Texas Intermediate (WTI) crude futures dropped 3.67% to $56.15.

“OPEC announced a second straight monthly output hike for June, adding 411,000 barrels per day to global supply. Coupled with a decline in crude prices could ease India’s oil import bill and support the rupee further,” said Amit Pabari, MD, CR Forex Advisors.

2. FPI Inflows

Foreign Portfolio Investors turned net buyers in April, infusing ₹4,223 crore into Indian equities after three months of selling. On Friday alone, FPIs net bought Indian shares worth ₹2,769.81 crore.

“Robust equity inflows reflect continued foreign investor interest in Indian assets, lending fundamental support to the rupee. Meanwhile, the newly issued 10-year government bond, with a 6.33% coupon, aligned with expectations and saw strong demand. With the benchmark 10-year yield stable at 6.36%, this positive response could attract further foreign inflows, reinforcing near-term rupee strength,” Pabari added.

3. Weakness in US Dollar

The US dollar weakened as a sharp rise in the Taiwanese dollar sparked speculation that Asian economies may be revaluing their currencies to secure trade concessions from the US.

The dollar index, which measures the greenback’s strength against six major currencies, was down 0.26% at 99.76. The dollar fell 0.6% to 144.03 yen, while the euro rose 0.4% to $1.1343.

4. Robust Domestic Economic Data

Stronger-than-expected domestic macroeconomic indicators also lent support to the rupee. Goods and Services Tax (GST) collections in April surged 12.6% year-on-year (YoY) to an all-time high of ₹2.37 lakh crore, reflecting resilience in the Indian economy.

Meanwhile, India's forex reserves increased $1.983 billion to $688.129 billion during the week ended April 25, the RBI said. This is the eighth consecutive week of a rise in the kitty.

5. Stock Market Rally

A robust rally in domestic equities further boosted rupee sentiment. The rally was driven by easing global trade tensions, strong US employment data, and continued FPI inflows.

The Indian stock market benchmark indices Sensex and Nifty 50 have both risen around 7% over the past month, reflecting investor confidence.

Rupee Outlook

Analysts expect the USD/INR pair to remain volatile in the near term.

“While capital inflows offer support, global uncertainties could cap gains. The pair may find support around 84.00, with resistance near 84.80 levels,” said Amit Pabari.

Jigar Trivedi expects the USDINR pair to move toward 84.00 – 83.80 in the near term, with a weak undertone for the pair, suggesting a broadly bullish view on the rupee.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.