Rupee gains 13 paise, briefly strengthens past 85/$ during session

Indian Rupee today: The domestic currency closed 13 paise stronger at 85.09 against the US dollar, after ending at 85.22 on Friday

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Indian Rupee extended gains to close higher for the second consecutive session on Monday, amid a broader gain in the Asian currencies on account of a weak dollar. 

 

The domestic currency closed 13 paise stronger at 85.09 against the US dollar, after ending at 85.22 on Friday, according to Bloomberg. During the session, the currency rose past the 85 per cent and went as high as 84.82 against the greenback.

 

The domestic unit has weakened by about 0.65 per cent so far this month. Meanwhile, the Korean won, Thai baht, and Indonesian rupiah have gained between 2.5 per cent and 5.5 per cent. 

 

The gain in current follows the Reserve Bank of India's recent surplus transfer of ₹2.69 trillion to the government, which fell short of some market projections ranging up to ₹3 trillion. The RBI dividend represents a substantial and durable infusion of liquidity into the system. However, its impact on system liquidity will become evident only when government expenditure begins to accelerate. 

 

In the short term, the large surplus transfer will lead to rupee liquidity expansion, putting mild depreciation pressure on the currency, according to Amit Pabari, managing director at CR Forex Advisors. "However, in the medium term, this move is growth-positive, as it boosts consumer spending, enhances credit demand, and helps corporates grow revenue." 

 

The rupee is likely to face strong resistance near 85.50 and 86.10 levels, and every uptick should be used by exporters to increase their hedge ratio, while the immediate support would be 85.00-85.10, Pabari said. 

 

The dollar index continued to face pressure after US President Donald Trump extended the deadline for 50 per cent European Union tariffs until July 9. The dollar index, which measures the greenback against a basket of six major currencies, was down 0.1 per cent at 99.01. 

 

Crude oil prices edged higher on easing trade tensions after Trump's deadline extensions for the EU. Brent crude price was up 0.15 per cent to $64.88 per barrel, while WTI crude prices were 0.08 per cent higher at 61.58, as of 3:45 PM IST. 

 

Foreign Institutional Investors (FIIs) could potentially continue selling due to a narrowing bond yield differential between Indian and US 10-year bonds. Global funds have already pulled out ₹4,000 crore from the Indian bond market last week (excluding Friday), the highest in over a month, compounding rupee pressure.

 

The global environment is turning favourable for Asian currencies, including the Indian rupee, which is benefiting from both capital inflows and dollar weakness, Pabari said.