Indian Rupee Nears Three-Month High Against US Dollar, Erases Most 2025 Losses

Rupee Strengthens to Best Levels Since January 2025

The Indian rupee surged to a three-month high against the US dollar on March 25, reversing most of its 2025 losses amid strong foreign inflows and declining global risk factors. According to Bloomberg data, the local currency was trading at 85.6900 per dollar at 1:15 PM, marking its best level since January 1, 2025, when it was at 85.6488.

This 26-paise gain during afternoon trade follows an opening rate of 85.9425 and a previous session close of 85.97 per dollar. So far in 2025, the rupee has only lost 0.04%, significantly recovering from earlier weakness.

Factors Driving Rupee Appreciation

Market analysts attribute the rupee’s recent rally to a combination of domestic and global factors, including:

• Foreign investor inflows into Indian markets

• Exporters selling dollars amid improved trade sentiment

• The Reserve Bank of India’s (RBI) USD/INR Buy/Sell swap auction

• Easing Brent crude oil prices

• Declining retail inflation in India

• Shrinking trade deficit

• A weaker US dollar index in global currency markets

Currency strategists suggest that traders are adopting a wait-and-watch approach ahead of the RBI’s scheduled USD/INR Buy/Sell swap auction, a move expected to impact liquidity in the forex market.

RBI’s $10 Billion Forex Auction to Inject Liquidity

The Reserve Bank of India (RBI) will conduct a USD/INR Buy/Sell swap auction worth $10 billion for a 36-month period on March 25. Dealers say this could infuse approximately ₹86,000 crore of durable liquidity into the market for three years, potentially strengthening the rupee further.

According to Anil Kumar Bhansali, Head of Treasury & Executive Director at Finrex Treasury Advisors LLP, uncovered exporter selling and sustained foreign portfolio inflows have played a crucial role in supporting the rupee’s recent appreciation.

Rupee Registers Best Weekly Performance in Over Two Years

On Friday, March 22, the rupee posted its strongest weekly gain in over two years, rising 1.2% against the US dollar. The currency also hit a 10-week high of 85.9375 during the session, further signaling a sharp recovery from its previous weakness.

This significant appreciation comes after months of pressure on the rupee, which had prompted heavy intervention by the RBI to prevent excessive depreciation.

The rally in the local currency has been driven by a combination of favorable global and domestic macroeconomic trends, with investors taking a more optimistic stance on India’s economic growth prospects.

Global Cues Supporting Rupee Strength

In addition to domestic factors, global market trends have also contributed to the rupee’s appreciation:

• The US dollar index has weakened, reducing the strength of the greenback against emerging market currencies.

• Brent crude oil prices have softened, lowering India’s import bill and reducing pressure on the rupee.

• Expectations of stable global interest rates have encouraged foreign investments into Indian equities and debt markets.

Analysts believe that if global market conditions remain favorable, the rupee could continue its upward trajectory in the coming weeks. However, any sudden geopolitical developments, changes in US Federal Reserve policy, or a surge in crude oil prices could impact the currency’s movement.