- Indian Rupee (INR) rises for a second day
- RBI limits lenders’ daily currency positions
- The US Dollar (USD) is falling versus its major peers
- Trump shows willingness to end the war
The US dollar-to-Indian rupee (USD/INR) exchange rate is falling for a second day. The pair fell -0.43% in the previous day, settling on Thursday at 94.37. At 18:30 UTC on Wednesday, the pair is down 0.65% to 93.77 and trades between 93.75 and 94.38.
The Indian rupee is rising as risk sentiment improves on growing optimism surrounding the situation in Iran.
The rupee is extending gains from earlier in the week following a decisive move by the Reserve Bank of India to curb speculation in the foreign exchange market.
The RBI said it would limit the daily currency positions that lenders can hold to just $100 million, restricting banks’ ability to take large directional bets against the rupee.
That said, while the Middle East conflict continues, the rupee may struggle to sustain its recovery given the potential implications for India’s growth outlook in the new fiscal year.
India remains particularly vulnerable to higher oil prices as a major net energy importer, and prolonged geopolitical uncertainty could continue to weigh on capital flows and investor confidence.
Uncertainty over the duration of the conflict has already prompted global funds to pull around $12 billion from Indian equities, while index-eligible bonds saw record outflows of $1.6 billion in March, adding to pressure on the currency.
The US dollar is falling across the board. The US Dollar Index, which measures the currency against a basket of major peers, is down 0.54% at 99.97, after five straight days of losses.
The US dollar is weaker today but remains on track for its strongest monthly gain since July last year.
The greenback had benefited from safe-haven demand throughout March. However, comments from President Trump suggesting he may be willing to end the conflict without first requiring the reopening of the Strait of Hormuz have fuelled hopes of de-escalation and improved broader market sentiment.
On the data front, US JOLTS job openings fell by more than expected to 6.28 million, below the 6.91 million forecast, while January’s reading was revised up to 7.24 million.
The data supports the view that the US labour market is gradually weakening, which may start to limit further upside in the dollar if softer employment trends continue.
