Whalesbook
Rupee Advances Amidst Global Dollar Weakness
The Indian rupee gained ground on Tuesday, buoyed by positive movements in Asian currencies, particularly the Chinese yuan. This appreciation, however, was significantly moderated by substantial dollar demand originating from large Indian corporates. These entities required greenbacks for import payments and servicing foreign-denominated debts, effectively capping the rupee's gains. The local unit settled at 90.58 per dollar, a marked improvement from the previous day's close of 90.77.
Dollar Index Under Pressure
The broader US dollar also weakened, with the dollar index falling below the 97 mark to 96.84. This decline was attributed to escalating concerns over foreign demand for US assets, fueled by expectations of potential rate cuts by the Federal Reserve later this year. Reports of Chinese regulators advising financial institutions to limit their exposure to US Treasuries further pressured the greenback, indirectly aiding the rupee.
Mixed Performance and Outlook
Despite the recent February gains, which stand at 1.56%, the rupee's performance in the current fiscal year (FY26) remains a point of caution, with a year-to-date depreciation of 5.04%. Analysts suggest the 90.00–90.20 per dollar zone represents strong immediate support. A move beyond this could see the rupee drift higher towards 91.00–91.20. The Reserve Bank of India (RBI) is expected to remain a key anchor, likely intervening with dollar purchases to absorb inflows and prevent sharp, destabilizing appreciation.
External Balance Improvement
Goldman Sachs has revised its estimate for India’s current account deficit downwards to 0.8% of GDP in CY26, citing reduced pressure following US tariff adjustments. The investment bank indicated that while pressure on the rupee has eased, significant further gains may be limited. Any pick-up in portfolio inflows post the India-US trade deal conclusion is expected to be managed by the RBI through unwinding forward positions and accumulating foreign exchange reserves, which have reached a record high of $723.77 billion as of January 30.