MUMBAI: The Indian rupee had its best week since January 2023, as an Iran-Israel ceasefire cooled oil prices and sapped safe-haven dollar demand, while worries over the Federal Reserve’s future independence added pressure on the greenback.
The rupee gained 1.3% on the week, its best performance in two and a half years, to close at 85.4750 per US dollar on Friday.
Crude oil prices retreated by over 11% this week after Iran and Israel reached a ceasefire following a 12-day war, which saw involvement of the US Meanwhile, the dollar index was down 1.5% on the week as investors, unnerved by fresh signs of an erosion in US central bank independence, wasted no time in pushing the greenback back to its lowest levels in over three years.
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“Part of the sell-off of the dollar is due to the unpredictability of policy from Washington and that is unlikely to change,” MUFG Bank said in a note. The rupee rose this week but it continues to lag behind its Asian peers amid persistent dollar weakness seen over 2025.
While currencies like the Korean won and offshore Chinese yuan are up between 2% and 9% this year so far, the rupee is little changed.
Bankers and analysts reckon that while the rupee’s underperformance is likely to persist, a broadly weaker dollar alongside portfolio inflows should support the currency in the near term.
Foreign investors have turned buyers on Indian government bonds over the last few sessions, while block trades and initial public offerings have drawn interest from global investors.
Later on Friday, the focus will be on US personal consumption expenditure (PCE) inflation data alongside remarks from Fed policymakers as investors try to gauge the future trajectory of the central bank’s policy rates.
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