The rupee closed at 85.47 per U.S. dollar, gaining 0.3% for the day and 2.3% in March.
That helped it pull away from its all-time low of 87.95 on February 10 and cut its losses to 2.4% for the financial year ending March 31.
The exodus of foreign money from Indian stocks and a spell of dollar strength had kept the rupee under pressure. However, the reversal of those factors recently helped the rupee claw back some losses.
The local currency also found support from seasonal inflows on account of repatriation of corporate dollar-based earnings, traders said.
The fiscal year’s final quarter also marked a shift for the rupee as two-way volatility picked up, with traders and analysts pointing to a likely change in the central bank’s currency intervention strategies, notably since Sanjay Malhotra took over as governor in December. “A two-way price action could become more common under the new regime, a shift from the prolonged period of low volatility seen previously,” said Abhishek Goenka, chief executive at FX advisory firm IFA Global. The rupee’s average 1-month realised volatility was about 3.5% from January to March, up from around 1.25% over the previous three months.
On the day, dollar sales by foreign and local private banks helped the rupee, with traders also noting speculative interest was somewhat dimmed due to upcoming market holidays and the U.S. reciprocal tariff announcement on April 2.
“Our estimates show that in a like-for-like, product-wise reciprocal tariffs scenario, India’s merchandise exports of $22.4 billion would be at most risk,” Aastha Gudwani, India chief economist at Barclays, said in a note.
While expectations of rupee volatility have picked up, they don’t seem to reflect a high degree of concern about tariffs yet, a senior trader at a state-run bank said.
India’s money markets are closed on Monday and Tuesday for local holidays.
