The currency opened at 85.69 to $1 and weakened up to 85.89 to $1 during the day, before closing slightly stronger, according to LSEG data. The dollar index was largely stable at 104.2.
“There seems to be more INR demand as we approach the financial year end as corporates would want to show healthy books and for banks surplus dollars in the annual books beyond the permissible limit invite capital charge, thus banks that have excess dollar try to trade them for rupee before the year ends. There have also been significant foreign inflows in equities and debt. Overall, 85.40/$1 seems to be acting as a base for now, as the currency is not going past these levels to get stronger,” said Kunal Sodhani, vice president, FX and rates treasury, Shinhan Bank India.
Markets will now be looking at the tariffs on India that would be implemented by the US on April 2. Amid uncertainty over the matter, some market participants think that Indian markets are underpricing the risks of tariffs.
“We think markets are underpricing the risks of reciprocal tariffs on India. While India is generally more domestically-oriented, reciprocal tariffs if raised to a meaningful level will still have a negative impact on India’s growth prospect in 2025,” MUFG Bank said in a report.
The Japanese bank, however, revised its forecast on the rupee to 87.50 to $1 by the end of 2025 from 88.50 to $1 previously.
