Rupee Strengthens Against US Dollar on Friday
The Indian Rupee (INR) strengthened against the US dollar (USD) on Friday, prompting a sigh of relief among investors and economists alike. The sudden surge in the value of the Rupee is attributed to suspected intervention by the Reserve Bank of India (RBI) following concerns over the potential impact of US President Donald Trump’s new 25% tariffs on Indian exports and persistent portfolio outflows.
On Thursday, foreign institutional investors (FIIs) offloaded equities worth ₹5,588.91 crore on a net basis, according to exchange data. This massive sell-off was likely a contributing factor to the Rupee’s weakness against the dollar in the preceding days. However, the RBI’s suspected intervention helped stabilize the currency and even pushed it higher against the USD.
The Rupee appreciated by 0.23% to close at 71.55 per dollar, its highest level in over a week. This strengthening of the Rupee is a significant development, considering the currency has been under pressure due to the US-China trade tensions and the subsequent impact on global trade flows.
The new tariffs imposed by the Trump administration on Indian exports, including textiles and electronics, have also raised concerns about the potential impact on Indian exports. The 25% tariffs, effective from October 15, are expected to increase the cost of Indian goods in the US market, making them less competitive. This could lead to a decline in Indian exports to the US, which could have a ripple effect on the Indian economy.
The RBI’s suspected intervention in the foreign exchange market helped stabilize the Rupee by selling dollars and buying Rupees. This move is likely to have helped reduce the pressure on the currency and prevent it from falling further. The RBI’s intervention is also seen as a sign of its commitment to maintaining the stability of the Indian currency.
Portfolio outflows have been a persistent issue for the Indian rupee, with foreign investors withdrawing funds from the country’s stock market. The sell-off by FIIs on Thursday was a significant contributor to the Rupee’s weakness, and the RBI’s intervention helped offset the impact of these outflows.
The strengthening of the Rupee against the dollar has several implications for the Indian economy. A stronger Rupee can make imports cheaper, which could help reduce the country’s trade deficit. However, it can also make Indian exports more expensive in the international market, which could offset the benefits of a stronger Rupee.
The Indian government and the RBI are likely to continue monitoring the situation closely and take necessary measures to stabilize the Rupee. The government has already taken steps to mitigate the impact of the US tariffs, including imposing retaliatory tariffs on US goods.
In conclusion, the Rupee’s strengthening against the dollar on Friday is a positive development for the Indian economy. The suspected RBI intervention helped stabilize the currency and prevent it from falling further. The RBI’s actions are likely to have helped reduce the pressure on the Rupee and maintained the stability of the foreign exchange market.
Source: https://investmentguruindia.com/newsdetail/rupee-strengthens-against-us-dollar-on-friday813498
