Rupee Holds Steady Against Dollar Despite Foreign Investor Exodus
The Indian Rupee maintained its position on Friday as favorable movements in the dollar index and crude oil prices provided support amid continued selling by foreign institutional investors (FIIs).
According to Bloomberg data, the local currency opened flat at 87.11 against the US dollar, unchanged from Thursday's closing rate.
Dollar Weakness and Oil Price Decline Provide Support
The Dollar Index weakened considerably, reaching a four-month low of 103.76 on Friday. This decline in the greenback's strength typically creates favorable conditions for emerging market currencies like the Indian Rupee.
Simultaneously, global crude oil prices have experienced a significant correction, tumbling approximately 15% from their recent peak. As India imports over 80% of its oil requirements, lower crude prices generally reduce the country's import bill and ease pressure on the Rupee.
Despite these supportive external factors, the Rupee has only managed a modest appreciation of 50 paise to 87.00 per dollar, indicating that other forces are tempering its potential gains.
Domestic Indicators Show Resilience
Several domestic economic indicators have displayed resilience, contributing to the Rupee's stability:
- A noticeable rebound in services PMI (Purchasing Managers' Index), suggesting strength in the services sector
- Fresh liquidity initiatives from the Reserve Bank of India (RBI) to support market stability
According to market experts, despite these positive developments, the Rupee's appreciation has remained subdued primarily due to tight liquidity conditions prevailing in the banking system.
Foreign Investor Outflows Continue
A significant headwind for the Rupee has been the persistent selling by foreign portfolio investors (FPIs). In 2025 so far, overseas investors have net sold equities worth an astounding Rs 1.34 lakh crore, according to data from the National Securities Depository Limited (NSDL).
This substantial outflow of foreign capital has created downward pressure on the Indian currency, offsetting many of the positive factors that would typically drive appreciation.
Crude Oil Market Trends
Oil prices are on track for their most significant weekly decline since October. As of 9:23 a.m. IST on Friday, Brent crude was trading up 0.24% at $69.63 a barrel, while West Texas Intermediate (WTI) had risen 0.17% to $66.47.
This continued weakness in global oil prices bodes well for India's fiscal health and could provide further support for the Rupee if the trend persists.
Global Market Context
The broader Asian market context remains challenging, with stocks in the Asia-Pacific region declining on Friday following a tumble on Wall Street overnight. This occurred despite US President Donald Trump's announcement that he would exempt Mexico and Canada from new tariffs on goods and services that fall under the North American trade agreement (USMCA).
Market analysts suggest that once liquidity conditions improve, the Rupee could make a stronger comeback. For now, however, the currency appears confined within a trading range of 86.80 to 87.30 against the US dollar.
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