The Rupee has appreciated further in trading so far, on Thursday, in the backdrop of the trade deficit for February 2025 narrowing to a 41-month low of $14 billion even as the US Fed held its rates steady.

The rupee opened 5 paise stronger at 86.39 per US dollar against the previous close of 86.44. In intraday trades so far, it tested a high of 86.20 and a low of 86.4125. It is currently trading at 86.3175.

The rupee appreciated on Wednesday to close about 12 paise higher at 86.44/dollar against a previous close of 86.56.

Foreign inflows

Amit Pabari, MD, CR Forex Advisors, noted that the rupee has staged a counterattack against external pressures, gaining support from strong foreign inflows into debt markets. With India’s real yield at 3.06 per cent, global investors have poured in nearly $496 million since March 17, pushing the rupee higher.

“Adding further strength, India’s trade deficit narrowed to $14.05 billion—the lowest since September 2021—resulting in a rare overall trade surplus of $4.5 billion. Meanwhile, industrial production surged by 5 per cent, and GDP growth rebounded to 6.2 per cent, reinforcing India’s economic resilience,” he said.

Risks

Pointing out that risks remain, Pabari cautioned that a ₹2 lakh crore liquidity shortfall, a Foreign Institutional Investor (FII) sell-off of ₹1,096.50 crore on Wednesday and uncertainty surrounding Trump’s tariff stance could pose challenges to the rupee’s upward momentum.

Given the current market dynamics, he expects the dollar/rupee pair to trade between 86.00 and 86.80 in near term.

Meanwhile, yield of the benchmark 10-year Government Security (6.79 per cent GS 2034) thawed about 2 basis points in trading so far in the wake of RBI conducting OMO purchase of G-Secs and VRR auctions to infuse liquidity in the banking system.

This G-Sec is currently trading at a yield of 6.64 per cent against yesterday’s close of 6.66 per cent.