Rupee's Remarkable Recovery

The Indian rupee has made a spectacular comeback, reaching 85.64 against the dollar, effectively wiping out all its losses for the year 2025. This surge marks the currency's highest level since late 2024, showcasing a significant rebound fueled by corporate dollar repatriation and renewed foreign investments in bonds and equities.

Driving Forces Behind the Rally

Key factors contributing to the rupee's nine-session winning streak include dollar inflows from inter-company borrowings and corporate profit repatriation. Seasonal influences and a substantial $3 billion in bond inflows have also played pivotal roles, alongside foreign equity purchases that further bolstered the currency's position as Asia's top performer in March.

Market Dynamics and Future Outlook

Foreign banks' dollar sales and exporters' strategies to capitalize on gains have propelled the rupee upwards, with a 2.1% increase in March outpacing regional counterparts. Analysts, however, caution against potential resistance from importers and overlooked risks from impending US tariffs. Despite these challenges, the rupee's momentum is supported by lower crude prices and a weaker dollar, with the RBI maintaining a relatively passive stance.

Experts like Jateen Trivedi of LKP Securities highlight the positive impact of FII buying and geopolitical developments, suggesting the rupee could approach the 85/$ threshold if current trends persist.