Indian Rupee Extends Rally as Weak US Data and Global Sentiment Boost Currency, opens 21 paise higher at ₹85.50

The Indian rupee continued its upward momentum on June 27, 2025, opening 21 paise higher at ₹85.50 against the US dollar, building on a strong close of ₹86.71 in the previous session. This marks the second consecutive day of gains for the currency, which is now poised for its best weekly performance in several weeks. The rally has been underpinned by a combination of weak US economic data, easing geopolitical tensions, and a significant drop in global crude oil prices.

Weak US Data Fuels Fed Rate Cut Expectations

A key driver behind the rupee’s strength has been the latest round of disappointing US economic indicators. Revised data showed that US first-quarter GDP contracted more than previously estimated, primarily due to a downward revision in consumer spending growth. This has strengthened market expectations of a potential Federal Reserve rate cut as early as September, with some analysts even anticipating a move in July. The yield on the 10-year US Treasury note fell to its lowest level in nearly two months, reflecting these shifting expectations. The US dollar index remained near multi-year lows, further supporting emerging market currencies like the rupee.

Geopolitical Relief and Oil Price Plunge

The rupee’s rally has also been supported by easing tensions in West Asia following the ceasefire between Israel and Iran. This development triggered a sharp drop in Brent crude oil prices, which have fallen over 12% this week to around $68.19 per barrel. Lower oil prices reduce India’s import bill, providing a significant tailwind for the rupee and improving the country’s current account outlook.

Market Sentiment and Inflows

Positive sentiment in domestic equity markets has further bolstered the rupee. Foreign institutional investors (FIIs) were net buyers of Indian equities, purchasing shares worth ₹12,594.38 crore on a net basis on Thursday. Strong inflows, coupled with robust risk appetite, have contributed to the currency’s upward trajectory. The Sensex and Nifty both opened higher, reflecting continued optimism among investors.

Currency Outlook and Trading Range

Treasury experts expect the rupee to trade within a range of ₹85.35 to ₹85.95 during the session. While inflows have dominated outflows in recent days, potential outflows from oil payments, Reserve Bank of India (RBI) dollar purchases, and global funds buying could cap further gains. A notable outflow is anticipated due to JSW Paints’ acquisition of Akzo Nobel, which could result in a $1 billion outflow. Conversely, the final day of the HDB Financial IPO is expected to attract additional foreign inflows, providing further support to the rupee.

RBI’s Flexible Position and Intervention Capacity

The RBI’s latest bulletin indicated a decline in its short dollar position to $73 billion, with outstanding positions of up to three months falling to $15 billion. This provides the central bank with greater flexibility to intervene in the forex market, ensuring stability and preventing excessive volatility. Analysts note that the RBI’s proactive stance has been instrumental in managing the rupee’s movement amid shifting global dynamics.

Global and Domestic Factors at Play

While the rupee’s recent performance has been strong, it remains one of the worst-performing Asian currencies this month, with a depreciation of 0.2% so far. However, the current rally reflects a confluence of supportive factors, including weak US data, lower oil prices, and robust equity inflows. The US dollar index was slightly higher in early trade, up 0.11% at 97.25, but remains well below recent highs.

Conclusion

The Indian rupee’s rally on June 27, 2025, reflects a favourable alignment of global and domestic factors. Weak US economic data, easing geopolitical tensions, and a sharp drop in oil prices have combined to drive the currency higher. With strong equity inflows and a flexible RBI, the rupee is well-positioned to extend its gains in the near term, though potential outflows and global uncertainties could temper the pace of appreciation.

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