Mumbai – The Indian rupee staged a strong recovery on Monday, erasing all its losses for 2025 and strengthening by 31 paise to close at 85.67 per US dollar. The domestic currency’s sharp appreciation was driven by sustained foreign fund inflows, a robust performance in the equity markets, and corporate dollar sales.
Key Drivers of the Rupee's Rally
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Foreign Capital Inflows – The rupee’s upward momentum was fueled by persistent dollar inflows from foreign banks and investors, particularly linked to corporate profit repatriations and inter-company borrowings.
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Stock Market Rally – The Indian equity market saw a strong rebound, with the Nifty 50 index rising nearly 1.5%, boosting investor confidence in the domestic currency.
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Strong FII Buying – Foreign institutional investors (FIIs) increased their participation, investing nearly $3 billion in Indian bonds and equities in March alone.
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Robust RBI Forex Reserves – The Reserve Bank of India (RBI) is expected to have played a stabilizing role by managing excess volatility in the forex market.
Outlook and Potential Risks
Despite the rupee’s nine-day winning streak, analysts remain cautious about potential headwinds. The upcoming US trade tariffs, set to take effect on April 2, could impact India’s export sector and weigh on the rupee. Additionally, the RBI may step in to curb excessive appreciation and rebuild reserves.
Market experts believe the rupee’s short-term trajectory will depend on global risk sentiment, RBI’s interventions, and continued foreign investment inflows.
With a strong close on Monday, the Indian currency has reaffirmed its resilience, positioning itself as one of the best-performing Asian currencies in recent weeks. However, market participants remain watchful of global economic and geopolitical developments that could influence its movement in the coming months.
