Over the past week, the dollar index (currently trading around 99.80) lost 3 per cent and the 10-year U.S Treasury yield has risen from 4 per cent to the current 4.4 per cent.
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The rupee gained ground over the last week. By closing at 85.77 on Tuesday versus 86.18 a week ago, the local currency appreciated by about 0.5 per cent against the dollar.

This was largely due to the weakness in the dollar and a rise in the US Treasury yields. While usually the dollar will climb up when the yields rise, the trade tensions have led to a loss of investor confidence in US bonds, leading to them offloading bonds which has pushed the yields higher.

Over the past week, the dollar index (currently trading around 99.80) lost 3 per cent and the 10-year U.S Treasury yield has risen from 4 per cent to the current 4.4 per cent.

Another factor that has been in favour of the rupee in recent times is the lower crude oil prices. So far, in April, Brent crude futures (currently at $64.50/barrel) has shed nearly 14 per cent.

The above reasons led to the rupee appreciating even though there were capital outflows over the past week. As per NSDL data, the net FPI outflows over the last week is about $4.4 billion. Now that the domestic equity markets have been on a recovery, the net flows could turn positive, helping the local currency further.

In line with the fundamental developments, technically, too, the rupee appears to be in a good shape.

Chart 

The rupee, which was on a steady decline since April 4, found support at 86.65. It rebounded off this level on April 10, rallied and closed at 85.77 on April 15.

The price action indicates a positive trend and there is a good chance for the Indian currency to move up further. From the current level, there is a minor resistance ahead at 85.50.

That said, this might not change the direction, but the rupee might only see a minor dip, possibly to 86.

A rally, either after a corrective fall or from the current level itself, can lift the local unit to the price region of 85.15-85.00, a potential barrier. Subsequent resistance is at 84.80.

The dollar index has a support at 99.50. On the back of this, it might recover to 101.25. But an upswing beyond this is less likely. A fresh fall, either from here or after a rise to 101.25, can drag the index lower to 98.00-97.80 price band.

Outlook 

Taking the above factors into account, we project the Indian currency to appreciate to 85.15 in the short-term although there might be a temporary dip.

Published on April 15, 2025