Rupee holds ground: USD/INR stays steady amid global moves

Introduction

Between April 25 and April 29, 2025, the Indian rupee (INR) showed relative stability against the U.S. dollar (USD), with minor fluctuations influenced by global economic factors, shifts in monetary policy expectations, and domestic financial indicators.

Exchange Rate Movements

April 25, 2025: The INR closed at ₹85.45 per USD, marking a 0.2% decline from the previous session. The currency traded within a range of ₹85.09 to ₹85.6550 during the day, showing intraday volatility due to mixed global sentiment.

April 26-28, 2025: The rupee maintained a narrow trading band, hovering around ₹85.30-₹85.55. Thin liquidity conditions and cautious market sentiment ahead of major economic data releases kept the pair relatively range-bound.

April 29, 2025: Forward market indicators suggested a slightly weaker opening for the INR, with non-deliverable forwards pricing the rupee between ₹85.12–85.16 per USD. Spot trading indicated some resilience in the rupee due to positive domestic economic data.

USD/INR Momentum: Monthly time frame shows strengthening Indian Rupee

USD/INR Momentum: Yearly time frame shows broader scenario of this currency pair

Global Economic Influences

U.S. Dollar Index: The U.S. Dollar Index (DXY) dropped by 0.7% during the week, primarily driven by renewed concerns over the progress of U.S.-China trade talks, as well as softening U.S. macroeconomic data, including weaker-than-expected durable goods orders.

U.S. Treasury Yields: The 10-year U.S. Treasury yield stood at 4.21%, indicating cautious investor sentiment. Expectations of a possible rate cut by the Federal Reserve later in 2025, driven by declining inflationary pressures, also weighed on the dollar's performance.

Oil Prices: Crude oil prices remained elevated, trading around $84 per barrel. Rising oil prices typically exert pressure on the Indian rupee given India's reliance on oil imports, although the impact was partially offset by strong capital inflows.

Domestic Financial Indicators

Foreign Exchange Reserves: As of April 18, 2025, India's forex reserves rose to a six-month high of $686.15 billion. This was driven by the Reserve Bank of India's active management of reserves through dollar-buying operations and favorable valuation changes in foreign currency assets.

Inflation Data: India's Consumer Price Index (CPI) inflation for March 2025 was reported at 4.9%, slightly below the Reserve Bank of India's upper tolerance band, supporting expectations of a stable monetary policy stance in the near term.

GDP Growth Projections: Various institutions, including the Asian Development Bank (ADB), revised India's GDP growth forecast for FY25 upward to 6.8%, citing resilient domestic demand and a recovery in the manufacturing sector.

Foreign Portfolio Investments: The rupee was further supported by foreign portfolio investments into Indian equities and debt markets. Net FPI inflows stood at approximately $1.3 billion during the week, reflecting renewed confidence in the Indian economy.

Equity Market Performance: Indian benchmark indices, the Nifty 50 and BSE Sensex, both posted gains of around 1.2% during the week, contributing to a stronger capital flow scenario and supporting the rupee.

Market Sentiment and Outlook

Technical Resistance and Support: The ₹85 level emerged as a significant psychological and technical resistance for USD/INR. A sustained break below ₹85.00 could lead to a move toward ₹84.80 in the short term, whereas a close above ₹85.60 would open the path toward ₹86.00 levels.

Options Market Activity: Elevated implied volatility in the options market suggested that traders were positioning for potential larger moves in the USD/INR pair, reflecting underlying market uncertainty.

Investor Behavior: Market participants remained cautious, keeping a close watch on global economic indicators, particularly upcoming U.S. GDP data and central bank communications. Domestically, attention was focused on corporate earnings reports and government fiscal performance.

Central Bank Actions: The Reserve Bank of India continued its two-way interventions in the foreign exchange market to curb excessive volatility, ensuring that the rupee's movement remained orderly.

Summary

The INR's performance between April 25 and April 29, 2025, was marked by minor but meaningful fluctuations, with the currency largely supported by strong domestic fundamentals, stable inflation data, and robust foreign exchange reserves. However, external risks, such as elevated oil prices and global economic uncertainties, continued to pose potential headwinds. Looking ahead, the rupee's trajectory will depend on both global risk sentiment and the domestic economic momentum sustained through the coming months.