Rupee Rebounds, Opens at 85.36/$ as Dollar Rally Loses Steam

After three consecutive days of decline, the Indian rupee rebounded on Friday. It opened at 85.36 against the U.S. dollar, gaining 16 paise from Thursday’s close of 85.52. What helped? The dollar’s recent surge lost some steam, giving emerging market currencies, including the rupee, a bit of breathing room.

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Why the Dollar Pulled Back

The rupee’s earlier drop had a lot to do with a temporary bump in the U.S. dollar. A U.S. federal court recently upheld former President Trump’s 2019 trade tariffs, which led markets to believe that protectionist policies might be back on the table. That gave the dollar index a quick boost.

But that rally didn’t last. Economic data from the U.S. turned out to be mixed, which cooled expectations that the dollar would remain strong for long. Softer-than-expected consumer spending for April and dovish comments from Fed officials suggested interest rate hikes might not be coming anytime soon. That helped ease pressure on the rupee.

What the Charts Say

From a technical perspective, the USD/INR exchange rate remains range-bound. It’s stuck in a range, waiting for a clear direction. Resistance is in the 85.70–85.90 zone, while support is seen around 84.90–85.10.

Dilip Parmar, a research analyst, put it this way: “Today’s gain is a good sign, but the rupee’s still trading in a broad range. For it to truly strengthen, we’ll need more capital inflows. Stable crude prices and a calm dollar index would also help the rupee inch closer to 85.00.”

The Bigger Picture

India’s economy is holding up well. GDP growth for Q3 FY25 came in at 6.2%, thanks to strong manufacturing and a growing services sector. Retail inflation has remained within the RBI’s comfort zone, allowing the central bank to maintain its policies steady.

India’s foreign exchange reserves are also in good shape, at $640.1 billion as of May 24. The RBI continues to manage the rupee actively to prevent significant swings.

Meanwhile, equity markets have also been lending support. The Nifty 50 reached an intraday high of 23,125, driven by solid earnings from IT and financial companies. That momentum has attracted more Foreign Portfolio Investors (FPIs), which is good news for the rupee.

Oil Prices and Global Winds

Lower crude oil prices have been another plus. Brent crude dropped to around $79.10 a barrel on Thursday, down from earlier highs of $84. Since India imports over 80% of its oil, cheaper crude helps cut the trade deficit and supports the rupee.

Global developments also played a role. Earlier, concerns about Middle East tensions and a slowdown in China had prompted investors to seek refuge in the U.S. dollar. However, recent diplomatic efforts and new stimulus measures from China have calmed nerves and taken some of the shine off the dollar.

What’s Next?

Experts are cautiously optimistic about the rupee's direction. The recent rebound is encouraging, but the path forward depends on upcoming data. Markets will be watching U.S. job numbers, India’s fiscal deficit figures for FY25, and the RBI’s next policy decision, scheduled for mid-June.

“We’re in a data-sensitive world right now,” said Amit Pabari, MD at CR Forex. “Even small surprises in U.S. inflation or rate talk can move the rupee-dollar rate a lot. For now, things look stable, but stay alert.”

For importers, the current level near 85.30 might be a good opportunity to lock in rates. Exporters may want to wait and see if the rupee strengthens a bit more.