The Indian rupee opened 75 paise stronger at 84.65 against the US dollar on Tuesday, compared to its previous close of 85.38 per dollar.
According to analysts, the trading range for the day was expected to lie between 84.50 and 85.25. The dollar maintained its gains following a significant trade agreement between the United States and China.
Under the pact, the US will reduce tariffs on Chinese goods from 145 per cent to 30 per cent for a period of 90 days, while China announced it would cut tariffs on US goods from 125 per cent to 10 per cent over the same duration. The two countries have agreed to establish a mechanism to continue dialogue on economic and trade relations.
Analysts noted that any fresh developments on the geopolitical front are likely to significantly influence the rupee’s trajectory.
In FY25, the rupee traded in the range of 83.10 to 87.60 against the greenback. It initially weakened following the US election results and depreciated by 2.4 per cent over the fiscal year due to persistent FPI outflows and a robust US dollar.
Despite these headwinds, the rupee remained relatively stable compared to other global currencies, supported by strong government finances, a narrowing current account deficit, improved liquidity, and moderating oil prices, among other factors, according to the NSE’s Market Pulse Report for April.
Towards the end of the year, a reversal in dollar strength and renewed FPI inflows into debt instruments supported the rupee’s recovery, leading to an appreciation of 2.4 per cent in March 2025.
The rupee’s average annualised volatility declined to 2.7 per cent in FY25, placing it among the least volatile major emerging market currencies and reflecting India’s robust external buffers and prudent forex management.
“However, the rupee remained overvalued, with the 40-currency trade-weighted REER rising to 105.3. Nonetheless, both REER and NEER moderated gradually from H1FY25, indicating a softening of the overvaluation. The one-year forward premium for the rupee continued to moderate, reflecting shifting premium dynamics and India’s macroeconomic resilience,” the report stated.
