The Indian rupee climbed to its highest level in over three weeks on Tuesday, bolstered by strong dollar inflows and the continued weakness of the U.S. dollar. The rupee touched a peak of 86.54 against the greenback—its highest level since February 21—before closing at 86.57, marking a gain of over 0.2% for the day.
Traders attributed the rupee’s appreciation to at least three large foreign banks selling dollars, although bids from state-run banks limited further gains. The currency has now strengthened for four consecutive sessions, recording an increase of approximately 0.8% so far this month. This momentum has been supported by a softer dollar, increased exporter dollar sales, and modest capital inflows.
India’s stock markets also saw a notable uptick on Tuesday, with the BSE Sensex and Nifty 50 both gaining over 1%, driven by strong performances from financial and metal stocks. Meanwhile, the U.S. dollar index dipped nearly 0.2% to 103.3, reflecting ongoing dollar weakness, while Asian currencies remained largely stable.
The U.S. dollar has been under pressure in recent weeks due to weak economic data and uncertainty surrounding the potential inflationary effects of former President Donald Trump’s trade policies. Market participants are now closely monitoring the Federal Reserve’s upcoming policy decision on Wednesday, which could provide further clarity on the central bank’s stance on interest rates amid growing concerns about economic growth.
MUFG Bank stated in a note that while the Fed is expected to acknowledge increased downside risks to growth, it is unlikely to signal any immediate rate cuts. Additionally, global investors are keeping an eye on geopolitical developments, including a scheduled phone call between Trump and Russian President Vladimir Putin, which may influence broader market sentiment.
As the rupee continues its upward trend, traders will be watching upcoming economic data and policy cues to gauge the currency’s trajectory in the near term.