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Key Points

The Indian Rupee is primed to gain strength as the US Dollar Index weakens and foreign portfolio investments rise, according to a report by Union Bank of India. Despite global uncertainties and volatile oil prices, these factors provide a cushion for the Rupee’s stability. The potential of a temporary trade deal between India and the US further boosts positive sentiment. However, the report cautions that rising tariffs and cross-border tensions could still negatively impact the Rupee's current trajectory.

Key Points: Rupee Gains Support Amid Weaker Dollar and Strong FPI

  • Weaker Dollar Index boosts Rupee
  • Strong FPI inflows support Rupee appreciation
  • Indian Rupee stabilizes amid global uncertainties
3 min read

Rupee to gain support from a weaker Dollar Index and strong FPI inflows: Report

Indian Rupee may strengthen due to a subdued Dollar Index and strong FPI inflows, says UBI.

"Rupee to gain support from a weaker DXY and anticipated strong FPI inflows. - Report"

New Delhi May 27

Buoyed by a weaker US dollar index (DXY) and expectations of strong foreign portfolio investment (FPI) inflows, the Indian rupee is likely to get support in the coming days, says a report by Union Bank of India (UBI).

These factors could provide a cushion for the rupee amid global uncertainties and volatile oil prices.

"Rupee to gain support from a weaker DXY and anticipated strong FPI inflows," the report added.

The report observes that the Indian Rupee is becoming more stable as most domestic issues have now settled, and signs of improvement in global conditions are visible.

However, the report adds that any fresh escalation in cross-border tensions or enhanced trade tariff issues could weigh negatively on rupee sentiment.

The Rupee briefly breaks out of a recent consolidation phase as significant FPI outflows hit, despite a subdued Dollar index. The levels break the Rs 86.00/USD handle after 11th April. However, the move reversed quickly before the RBI's expected robust dividend announcement, which supported sentiment around the local currency, leading to an appreciation of 0.34 per cent this week.

The U.S. Dollar Index, currently trading below the 99.00 level, continues to act as a tailwind for the Indian rupee, helping it stay supported in the near term.

Positive sentiment has been boosted by the possibility of a temporary trade deal between India and the US, which could be announced before July 8.

As part of the deal, India is reportedly trying to get full relief from the 26 per cent additional tariff on its exports to the US. If both the US and India agree to the deal, it will have a positive impact on the Rupee. The trade deal will help the Rupee to consolidate at around the current levels. Steady demand for dollars from big importers and oil companies continues to limit any sharp gains for the rupee.

From a technical perspective, the USD/INR exchange rate is expected to trade sideways for now. Support for the Rupee is seen at around Rs 84.80 per dollar and if it falls below that, it could go down further to Rs 84.45, as per the report. On the other hand, resistance is expected near Rs 85.90, and if the dollar breaks above this, it could rise to Rs 86.80.

Going forward, the report says that there are two main risks that could impact the Rupee. First is the anticipation of a sharp rise in the US dollar index (DXY) and second, any new trade or border tensions, which could hurt investor confidence.

- ANI

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Reader Comments

Here are 5 diverse Indian perspective comments for the article:
R
Rajesh K.
Good to see our rupee stabilizing! 🇮🇳 The strong FPI inflows show global confidence in India's economy. Hope RBI maintains this balance - we don't want too much volatility that affects petrol prices and imports.
P
Priya M.
While the report is optimistic, I'm concerned about the mention of border tensions affecting rupee value. Our policymakers should ensure economic growth isn't held hostage by geopolitical issues with neighbors. Focus should be on making exports more competitive.
A
Amit S.
Strong rupee is good for my IT company's bottom line! 💻 Less conversion loss when our US clients pay in dollars. Hope the US trade deal materializes soon - that 26% tariff relief would be a game changer for many industries.
S
Sunita R.
As a small business owner importing materials, I track rupee-dollar rates daily. This stability helps in planning. But the report could have explained more about how oil prices factor into this - that affects all our costs ultimately.
V
Vikram J.
The technical analysis part is interesting - Rs 84.80 support and Rs 85.90 resistance levels give clear markers. But with US elections coming, dollar volatility is expected. We need to build stronger forex reserves as buffer.

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