Indian Rupee Strengthens for Seventh Consecutive Day, Opens 2 Paise Higher Against the US Dollar

On Thursday, March 20, 2025, the Indian Rupee opened at ₹86.41 against the US dollar, marking its seventh straight day of strengthening. The domestic currency opened 2 paise stronger compared to its previous close of ₹86.43 on Wednesday. This strengthening is attributed to a fall in the US dollar index. The rupee has appreciated by 1.27 per cent in March so far.

Factors Influencing Rupee Appreciation

According to Bloomberg data, the Indian Rupee opened stronger due to the fall in the US dollar index. Reportedly, the Reserve Bank of India (RBI) might allow the rupee to appreciate further following the regulator's decision to ask banks to cut long-arbitrage positions in non-deliverable forwards (NDF). Bhansali anticipated the rupee to open even higher at ₹86.35, reaching a two-month high, despite a general decline in Asian currencies.

Rupee's Performance and Market Outlook

While the rupee has shown appreciation in the short term, it has witnessed a 3.5 per cent fall during the current financial year. Earlier in the day, the rupee had also fallen 10 paise to ₹86.66 against the US dollar during early trade. Amit Pabari, managing director at CR Forex Advisors, expects the USD-INR pair to trade between ₹86.00 and ₹86.80 in the near term. He noted that with ongoing Foreign Institutional Investor (FII) outflows and liquidity deficit conditions, a slight rebound towards the ₹86.50 - ₹86.60 range is likely. However, Pabari believes that as conditions improve, any upward movement could be a selling opportunity, potentially driving the rupee towards the ₹ 85.80 level.

Global Economic Factors and the US Dollar

The US dollar index, which measures the value of the US dollar against a basket of foreign currencies, was down 0.04 per cent at 103.39. US Federal Reserve Chair Jerome Powell indicated that there is still room to cut rates later in the year, also mentioning President Donald Trump’s policies as a factor contributing to reigniting inflation. The Fed’s stance has kept the US dollar resilient, with the dollar index expected to remain range-bound between 103 and 104 in the short term. However, expectations of rate cuts in 2025 could limit further upside, potentially leading to a move toward 102 levels if economic conditions soften.

Impact of FII Outflows and Crude Oil Prices

Foreign institutional investors turned net sellers on Wednesday, offloading ₹1,096.5 crore from Indian equities. So far this year, global funds have pulled out ₹1.46 trillion from domestic stocks. Meanwhile, crude oil prices rose on Thursday amid uncertainty acknowledged by Powell regarding Trump's policies. Brent crude oil was up 0.44 per cent to $71.09 per barrel, and WTI crude was up 0.40 per cent at $67.43 per barrel as of 8:50 AM IST.

Other Relevant Financial News

The sources also mentioned other financial news, including DLAI's rebranding to Unified Fintech Forum as it pursues its SRO bid. Net Foreign Direct Investment (FDI) dipped to $1.4 billion in April-January 2025, although gross FDI rose by 12.4%, according to RBI data. The RBI's net short position in forward swelled to $77.5 billion in its monthly bulletin. IndusInd bank raised an additional ₹2,750 crore via Certificates of Deposit (CDs), as per CCIL data. Additionally, a parliamentary panel raised concerns over the dip in the CASA (Current Account Savings Account) ratio for banks. 

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