Indian Rupee logs best session since March 2023 as dollar weakness deepens

The Indian Rupee closed with gains on Friday as escalating trade tensions between the US and China triggered a plunge in the dollar and oil prices.

 

The domestic currency strengthened 64 paise to end at 86.24 against the greenback after closing at 86.69 on Wednesday, according to Bloomberg data. On Friday's session, the currency registered its best day since March 3, 2023

 

In the escalating trade conflict, China imposed additional tariffs on American goods from 84 per cent to a steep 125 per cent. The move comes after US President Donald Trump imposed a 145 per cent tariff on some Chinese goods. Trump, meanwhile, announced a 90-day tariff pause for all countries except China. 

 

The dollar index — a measure of the value of the US dollar relative to a basket of foreign currencies — fell 1.49 per cent to 99.36, the lowest since April 2022.

 

Chinese yuan gaining pace, sharp fall in the dollar index has provided support to regional EM currencies, according to analysts. "With the rupee now firming and sentiment improving, a sustained breach below 86.00 could open the door for further gains toward the 85.50–85.60 levels," Amit Pabari, managing director of CR Forex Advisors, said.

 

With both global cues and domestic equity strength favouring the rupee, momentum remains upward in the short term, according to Jateen Trivedi, VP research analyst - commodity and currency, LKP Securities. "The Rupee is expected to trade in the range of 85.50–86.50, with continued support as long as global risk sentiment remains stable and FII inflows are sustained."

 

The rupee is expected to rise above 86 with the dollar index down below its September low of 100.20 with expectations of a further fall to 95 levels, Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. "A good uptick has allowed exporters to cover their exports holding and any upside due to risk aversion should be utilised for further covers."

 

Crude oil prices dropped for the second week in a row on concerns of a prolonged trade war between China and the US.  Brent crude oil was up 0.47 per cent to $63.63 per barrel, while WTI crude was up 0.57 per cent at 60.41 per barrel as of 3:40 PM IST.