Rupee’s recovery to 85/$ adds to exporters’ woes

MUMBAI: The rupee briefly regained 84 levels to touch a 2025 high of 84.97 against the dollar on Friday as the greenback weakened globally before closing at 85.24, up 19 paise from Thursday’s close of 85.43. The strengthening of the rupee is expected to hurt exporters. The dollar index, which tracks the greenback’s movement against six major currencies, was down 0.4% at 101.64. According to analysts, the rupee found support from weaker crude prices, though a firm dollar index limited further gains.
Meanwhile, forex reserves rose by $6.6 billion to $665.4 billion in the week ended March 28, marking the fourth straight weekly rise. The increase follows recent declines caused by revaluation and RBI interventions to manage rupee volatility. Foreign currency assets, the largest component of the reserves, rose by $6.2 billion to $565 billion.
“The rupee is currently less vulnerable, except in scenarios involving competitive currency devaluation, particularly by the Chinese yuan,” said Jitendra Gohil of Kotak Alternate Asset managers. He added that while net interest margins may face pressure if the RBI cuts rates, this could be offset by faster credit growth.
“The dollar index’s positive rally capped further appreciation in the rupee,” said Jateen Trivedi of LKP Securities. He added that with non-farm payroll (NFP) data & unemployment data scheduled for release in the evening, markets are expected to remain cautious, and the rupee may react sharply depending on the outcome.
The dollar recorded its steepest single-day drop since late 2022 following the announcement of broad tariffs, even as stock markets fell. Investors moved away from the dollar, raising concerns over its weakening safe-haven status. Analysts attributed the shift to protectionist policies, rising debt, and growing doubts over the economic leadership of the issuing country. Initial expectations that tariffs would support the dollar have faded as recession fears and slower growth weigh on sentiment.