Rupee strengthens on the back of foreign inflows and US dollar slips

The rupee appreciated against the dollar on Monday on the back of foreign inflows and weakness in the greenback, according to dealers.

 

The local currency settled at 85.38 per dollar, against the previous close of 85.58 per dollar. It has appreciated by 0.1 per cent against the dollar in the current financial year, and has witnessed 0.27 per cent appreciation in the ongoing calendar year.

 

“There were some inflows and the dollar was down again,” a dealer at a state-owned bank said. “We will see movement in the current range, until any major movement happens with the dollar,” he added.

 

The dollar index fell to 99.18, against the previous close of 99.56. It measures the strength of the greenback against a basket of six major currencies. 

 

The dollar weakened as markets assessed the outlook of the United States President Donald Trump's tariff policies and their potential to restrict economic growth while driving inflation. The greenback began the week on the backfoot after Trump announced plans to double tariffs on steel and aluminum to 50 per cent starting Wednesday. The US currency has been whipsawed in recent weeks by Trump’s erratic trade war rhetoric, often falling when renewed tensions heighten fears of a potential US recession.

 

“Rupee remains in consolidation mode with a broad range of 85-86 with the market awaiting for an event to change the range,” Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said.

 

Traders now await the Reserve Bank of India’s monetary policy committee’s meeting outcome on Friday for fresh cues, dealers said. The domestic-rate setting panel is expected to cut the repo rate by another 25 basis points.

 

The panel had cut the policy repo rate by 25 bps in April, following a 25 bps rate cut in February after keeping it unchanged for 11 consecutive meetings. This followed a 250 bps increase from May 2022 to February 2023.