Rupee In Strong Rally, Tops 84 For The First Time Since October 2024; What Analysts Predict?

Rupee VS Dollar: Despite the dollar testing above 100 levels and performing for its second weekly gain, the Indian rupee has shown unabated performance against the greenback. On Friday, in the early trade, the rupee traded strongest in seven months, topping the 84 mark. The rupee has sharply strengthened from its peak level in February, driven by heavy selling of the dollar by foreign banks and consistency in the flow of foreign funds.

The Indian currency joined the rally bandwagon with its Asian counterparts, who also strengthened against the dollar.

On May 2nd, Asian currencies rallied owing to the expectation of positive development from China-US talks. Earlier, China's commerce ministry reported that it is evaluating the possibility of discussing tariffs with the US. Both China and the US entered into an intense trade riff after Trump imposed reciprocal tariffs.

At the time of writing, the local unit traded at 83.8720, climbing by nearly 1% from the previous closing print of 84.69. With that, the rupee is now at its highest level in 2025 and also at its highest zone since October 2024. From its historic low, the rupee has appreciated significantly.

Rupee had touched its all-time low of 88.10, which was in February 2025. From this level, the rupee has appreciated by 4.79% against the US dollar.

Amidst US-India trade talks and geopolitical tension with its neighboring country Pakistan, the key reasons behind the rising Indian rupee, as per Ajay Kedia, director of Kedia Advisory, are optimism over a potential US-India trade deal and the possibility of China in trade talks with the US, which is likely to boost global sentiment.

The Chinese Commerce Ministry confirms multiple outreach efforts from the US. The offshore yuan also rose to 7.26 against the previous session's 7.28 per dollar after investors' sentiment improved.

Meanwhile, the Japanese yen strengthened to hit 145.205 against the dollar after losing nearly 2%. Both Japan and the US conducted a second round of bilateral trade talks earlier this week.

Among the Asian currencies, the rupee performed the second strongest after South Korea's currency, KRW. The Korean won gained by over 1.4% and currently trades around 1,419 levels, as investors cheer after fresh domestic economic data, like exports surprisingly increasing by 3.7% YoY despite a decline in shipments to the US. Also, Korea's inflation rate stood at 2.1%, along with the central bank's decision to keep rates unchanged to 2.75%.

Also, the rupee opened higher and rose above 84.00 because of rumors of an India-US trade deal happening this week and China willingly coming for trade talks with US, explained Anil Kumar Bhansali of Finrex Treasury.

Coming to the dollar index, it traded around 100.03 in the early deals at the forex market on Friday, compared to the previous print of 100.21, putting it well poised to record second weekly gains.

China announced it is evaluating the possibility of trade talks with the US, following multiple outreach attempts from Washington. Earlier this week, President Donald Trump also hinted at potential trade agreements with India, Japan, and South Korea, and expressed confidence in a possible deal with China. Meanwhile, the latest GDP, private payrolls and weekly jobless claims data pointed to slowing US economic activity, supporting bets on near-term Federal Reserve rate cuts and limiting the dollar's rally. Investors now turn their attention to the April jobs report which can give investors more insights on how shifting trade policies are affecting the economy, as per Trading Economics data.

Going ahead, Kedia said, the Indian Rupee strengthened further, with USD/INR maintaining a bearish structure below its 100-day EMA. The 14-day RSI falling under 30 points to oversold conditions, raising the possibility of short-term consolidation or recovery. Key support levels are at 83.76 and 83.20, while resistance is seen at 85 and 85.60, with 86.25 marking the upper trend boundary. Traders remain cautious amid oversold signals and nearby technical thresholds.

However, the analyst expects rising India-Pakistan tensions could pose a downside risk to the rupee. Pakistan alleges imminent Indian military action following a Kashmir attack.

The rupee may find support at 83.70 and resistance at 84.50 and then 85.50 levels. said Anuj Gupta, Research Analyst at HDFC Securities, adding rupee gained due to a week dollar, easing crude prices and FIIs inflow into the equity market.

"We now forecast INR to outperform Asian FX with our global team's call for more US Dollar weakness together with better than anticipated tariff outcomes for India in Trump 2.0," MUFG said in a Friday note, as per the Reuters report.

FIIs ended the April month with an inflow of Rs 2,735.02 crore in Indian stocks, marking its second consecutive monthly buying. In March, FIIs bought Rs 2,014.18 crore worth of domestic equities. Also, after being net sellers for four consecutive months, foreign portfolio investors (FPIs) turned net buyers in April with an inflow of Rs 4,223 crore.