Currency Confidence Returns—Rupee Edges Higher Against USD

The Indian rupee (INR) posted a modest gain on September 16, 2025, ending the trading session at ₹88.0525 per U.S. dollar, up 0.18% from its previous close of ₹88.21. The currency’s appreciation comes amid a mix of supportive domestic cues, easing global crude oil prices, and renewed foreign institutional investor (FII) interest in Indian equities and debt.

 

This uptick marks a reversal from last week’s mild depreciation, signaling cautious optimism in the forex market. Traders and analysts attribute the rupee’s resilience to a combination of stable macroeconomic indicators, robust capital inflows, and central bank liquidity management.

 

Market Drivers Behind the INR Upside

Several factors contributed to the rupee’s upward movement:

 

Softening Crude Oil Prices: Brent crude hovered around $89.50 per barrel, down from recent highs, easing pressure on India’s import bill and trade deficit. As India imports over 85% of its oil needs, lower prices directly support the rupee.

 

FII Inflows: Foreign investors have resumed buying into Indian markets, particularly in banking and infrastructure stocks. On Monday alone, FIIs net bought ₹1,250 crore in equities, reversing a two-week selling streak.

 

Stable Inflation and Growth Outlook: India’s retail inflation eased to 5.02% in August, while GDP growth for FY2026 is projected to exceed 7.5%, reinforcing confidence in the rupee’s fundamentals.

 

RBI’s Tactical Intervention: The Reserve Bank of India (RBI) is believed to have intervened intermittently to curb volatility, using spot and forward market tools to maintain orderly movement in the currency.

 

Central Bank Strategy and Currency Management

The RBI has maintained a non-disruptive stance in the forex market, allowing the rupee to adjust gradually while stepping in to prevent excessive swings. Analysts suggest that the central bank’s ample forex reserves, which stand at $615 billion, provide a strong buffer against external shocks.

 

“The RBI’s approach is pragmatic—they’re letting the rupee find its level while ensuring it doesn’t overshoot in either direction,” said Anindya Banerjee, VP of Currency Derivatives at Kotak Securities.

 

The central bank’s recent SDL auction, where 14 states raised ₹184 billion, also helped absorb excess liquidity and stabilize short-term interest rates, indirectly supporting the rupee.

 

Global Context: Dollar Strength and Fed Signals

Globally, the U.S. dollar index remained steady around 104.7, with markets awaiting fresh cues from the Federal Reserve’s upcoming policy meeting. While the Fed is expected to hold rates steady, any hawkish commentary could reignite dollar strength and pressure emerging market currencies.

 

However, India’s relatively high real interest rates and strong growth outlook make the rupee more resilient compared to peers like the Thai baht or Indonesian rupiah, which have seen sharper depreciations in recent weeks.

 

Outlook: What’s Next for the Rupee?

Currency strategists expect the rupee to trade in a narrow range of ₹87.80–88.30 in the near term, barring any major global shocks. Key triggers to watch include:

Exporters are advised to hedge near ₹88.30, while importers may find value in short-term forward contracts below ₹88.00.

 

“The rupee is showing signs of stability, but global headwinds remain. It’s a good time for corporates to lock in favorable rates,” said Rahul Gupta, Head of Research at Emkay Global.

 

Sources: Investing.com, Exchange-Rates.org, ForTrader.org