Rupee Gains 26 Paise to Close at 85.68 Against US Dollar as Oil Prices Dip and Equities Advance

Mumbai, 8 July 2025: The Indian rupee appreciated by 26 paise to settle at 85.68 against the US dollar on Tuesday, recovering from Monday’s sharp fall. The rebound was supported by easing global crude oil prices, a weaker dollar index, resilient domestic equity performance, and sustained foreign fund inflows. The currency’s upward move reflects improving investor confidence, aided by reduced pressure on the trade deficit and expectations of better bilateral trade flows.

Crude Oil Price Correction Offers Immediate Relief to Rupee

Brent crude futures fell by 0.55% to USD 69.20 per barrel, easing concerns around India’s import-driven energy bill. India imports over 85% of its crude oil needs, and any decline in prices directly supports the rupee by narrowing the current account deficit. A softer oil market improves inflation outlooks and reduces external vulnerability for energy-dependent economies like India, making the currency more attractive to foreign investors.

Narrow Range Trading Shows Investors Remain Cautiously Optimistic

The rupee opened at 85.75 at the interbank foreign exchange market and traded within a tight range of 85.64 to 85.80, indicating controlled volatility. It marked a steady recovery from the previous session’s steep decline of 54 paise, when the rupee had ended at 85.94—its lowest level in nearly two months. Traders suggest this stability reflects the market’s wait-and-watch mode ahead of anticipated global and bilateral economic developments.

Weak Dollar Index Enhances Rupee’s Appeal

The US Dollar Index, which gauges the greenback’s strength against a basket of six major global currencies, declined by 0.18% to 97.30. This made the dollar less appealing to investors and enhanced the attractiveness of emerging market currencies, including the rupee. Typically, a weaker dollar encourages capital flows to higher-yielding markets like India, which benefits from an improving macroeconomic backdrop and stable policy outlook.

Optimism Over India-US Trade Pact Supports Sentiment

Investor sentiment received a mild boost from expectations surrounding a potential mini trade agreement between India and the United States. Though no official confirmation has been issued, market participants anticipate that renewed talks could ease trade barriers in critical sectors such as pharmaceuticals, IT services, and agricultural exports. These developments, if realised, would improve India’s export competitiveness and offer long-term structural support to the rupee.

Domestic Equities and FIIs Offer Steady Support

Aided by strong domestic cues, the BSE Sensex climbed 270.01 points to 83,712.51, and the NSE Nifty advanced 61.20 points to 25,522.50, reflecting underlying investor confidence in the economy. Foreign Institutional Investors (FIIs) remained net buyers, pumping in ₹321.16 crore into Indian equities on Monday, as per exchange data. FIIs have turned selective buyers in recent sessions, driven by robust earnings outlooks and stable monetary policy.

Broader Macro Indicators Point to Stable Trajectory

India’s macro fundamentals continue to show resilience. Retail inflation remains within the RBI’s target band, and foreign exchange reserves stood at USD 648.7 billion as of the last reported week, offering a strong buffer against external shocks. Additionally, the services PMI for June showed continued expansion, indicating sustained momentum in the non-manufacturing sector.

Outlook: Rupee May Trade Steady with Slight Upward Bias

According to analysts, the rupee is likely to trade in a narrow band of 85.30 to 86.00 in the near term, supported by external softness in crude and the dollar. However, traders remain cautious ahead of potential US Fed commentary later this week, which may impact global capital flows. The rupee’s performance will also be shaped by local demand for dollars from oil importers and potential intervention by the Reserve Bank of India to manage excessive volatility.

In the broader view, the combination of softening oil prices, stable equity inflows, and improved trade prospects provides a cautiously optimistic backdrop for the rupee heading into the second half of July

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