Traders cited bids from importers and state-run banks as capping gains, with speculation that the RBI may be buying dollars to rebuild forex reserves, now at a near five-month high of $677.8 billion.
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The Indian rupee extended its winning streak on Monday as the dollar remained on the defensive, with investor confidence in U.S. assets dented by President Donald Trump’s criticism of the Federal Reserve chief.
The rupee closed at 85.1275 against the U.S. dollar, up 0.3% on the day. The local unit touched an over two-week high of 85.0450 against the dollar earlier in the day, before paring gains.
Asian currencies rallied as well, with the Thai baht and Malaysian ringgit leading gains with a near 1% rise each. The dollar index dropped 0.8% to an over 3-year low of 97.9.
Criticism of the Federal Reserve by President Donald Trump has further dented investor confidence in U.S. assets, already weighed down by anxiety over the impact of U.S. trade tariffs.
“The most important thing to watch out for markets may be how the disagreement between President Trump and Fed Chair Powell could play out further, and as such also further raising concerns around US exceptionalism,” MUFG Bank said in a note.
While a weaker dollar alongside offers from foreign banks helped the rupee on Monday, bids from importers and state-run banks hurdled the currency’s gains, traders said.
Dollar bids from state-run banks also prompted traders to speculate that the Reserve Bank of India may be absorbing dollar inflows to replenish its foreign exchange reserves.
India’s FX reserves have rose to a near 5-month high of $677.8 billion as of the week ended April 11. Benchmark Indian equity indexes, the BSE Sensex and Nifty 50 rose over 1% each on the day.
Meanwhile, dollar-rupee forward premiums fell with the 1-year implied yield down 5 basis points at an over one-month low of 2.08%. The rupee’s rally alongside a rise in U.S. bond yields weighed on the forward premiums, traders said.
Published on April 21, 2025
