Rupee logs biggest weekly gain in over 17 months as dollar softens

The Indian rupee posted its biggest weekly gain in nearly 17 months, rising 0.3 per cent on Friday, driven by a decline in the US dollar index after US President Donald Trump refrained from immediately imposing tariffs on key trading partners.

 

The rupee appreciated and settled at 86.21 per US dollar on Friday, compared to its closing level of 86.47 on Thursday, marking a weekly gain of 0.47 per cent.

 

“The rupee gained notable strength this week as the dollar index witnessed a significant decline from its peak of 110 to 107.66. The drop in the dollar followed Trump’s oath ceremony, where concerns over heavy tariffs on China were alleviated after no such drastic measures were announced. This brought relief to global markets and supported emerging market currencies like the rupee,” said Jateen Trivedi, vice-president, research analyst - commodity and currency, LKP Securities.

 

This week’s gain in the rupee is its best since the local currency recorded a 0.54 per cent appreciation for the week ended August 25, 2023. The third-best gain since August 2023 was observed in the week ended December 15, 2023, when the rupee appreciated 0.46 per cent against the US dollar.

 

“Adding to the rupee's strength this week was a softer trend in crude prices, which reduced import pressure and supported the domestic currency,” Trivedi added.

 

The dollar index fell by 1.7 per cent this week, as Trump’s tariff threats, which had loomed over markets in recent months, were not immediately enacted. In an interview, Trump also suggested the possibility of a trade agreement with China, raising hopes of some easing in the trade war tensions that had previously caused market volatility.

 

The dollar index measures the value of the US currency against a basket of six foreign currencies, including the euro, Swiss franc, Japanese yen, Canadian dollar, British pound, and Swedish krona.

 

Looking ahead, “The rupee will remain in the range of 85.90 and 86.60 per dollar in the near term,” said a dealer at a state-owned bank.

 

Meanwhile, India's foreign exchange reserves fell by $1.88 billion to $623.98 billion in the week ended January 17, according to the latest data from the Reserve Bank of India.

 

The total reserves fell due to a decline in foreign currency assets, which dropped by $2.78 billion during the week.