Rupee Rallies To Multi-Month Highs as Inflows Surge and Asian Currencies Rise

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May 02, 2025: The Indian rupee extended its upward momentum on Friday, buoyed by strong performance across Asian currencies and expectations of sustained foreign portfolio inflows. The currency’s rally comes after a nearly 1% surge on Wednesday, its best single-day performance in over two years.

The one-month non-deliverable forward (NDF) suggested the rupee would open at 84.42–84.44 per U.S. dollar, marginally stronger than its Wednesday close of 84.4875. Markets were closed on Thursday due to a public holiday.

The rupee’s breakout from the key resistance zone of 84.90–85.00, which coincides with the 200-day moving average, triggered a wave of stop-loss selling on long dollar positions, along with inflows and export-related hedging. A Mumbai-based trader noted, “Now that this resistance has been decisively breached, reversing the rupee’s momentum will require significant external pressure.”

Despite recent geopolitical tensions with Pakistan following the Kashmir terror attack, the rupee’s rise is seen as a sign of investor confidence. Market watchers attribute the surge in part to the pickup in equity inflows, with foreign investors purchasing $276 million in Indian equities on April 29, according to NSDL data.

Regional and Global Cues

Asian currencies also gained, with the offshore Chinese yuan strengthening beyond 7.2550 per dollar. Meanwhile, the U.S. dollar index rose for the third straight day, topping 100.1, ahead of key non-farm payrolls data due later Friday.

A weaker-than-expected jobs report could prompt a reassessment of the Federal Reserve’s rate-cut timeline, potentially weighing on the dollar and boosting risk assets, said Chris Weston, head of research at Pepperstone.

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Key Market Indicators:

• 1M NDF rupee forward: 84.62
• Onshore forward premium: 19.25 paisa
• Dollar index: 100.1
• Brent crude: $62.7/barrel, up 0.9%
• 10-year U.S. yield: 4.23%
• Foreign equity inflows (Apr 29): +$276 million
• Foreign bond outflows (Apr 29): -$122.7 million