MC Analysis| Rupee has gained over 2% in 2025

Rupee

Positive talks on tariffs between India and the US has led the Rupee to appreciate 2.16 percent so far in 2025.

Currency experts said that the appreciation was also due to inflows from foreign investors in the equities and debt segments.

The local currency jumped to 84.0513 against the Dollar on May 2, compared to 85.2550 against the greenback on April 29.

“The Rupee got support from the easing of trade tensions  with the US, which indicates high chances of a deal with India,” said Gaura Sengupta, Economist, IDFC First Bank.

Tensions over the tariffs started easing after US President Donald Trump said that  talks with India were "going great" and suggested that there was a possibility that the two nations would soon reach a deal.

On April 29, India’s commerce ministry said New Delhi and the US are betting on opportunities for early mutual wins as both sides inch closer to finalising a multi-sector BTA (bilateral trade agreement) by the autumn of 2025, with in-person sectoral-level engagements planned from the end of May.

This has also caused the Dollar index, which measures the American currency's value against six major global peers, to rise. Currently, the Dollar index is at 99.946.

Prior to this, the index eased sharply after the imposition of tariffs by the US, its potential impact on the US economy, and most recently, due to concerns about the US Federal Reserve’s independence.

Prior to this,  given the potential impact on the US economy, the index eased sharply after the north American nation imposed tariffs, and most recently, due to concerns about the US Federal Reserve’s independence.

According to Bloomberg data, the Dollar index eased from 104.260 on April 1, before the tariffs, to 99.468 on April 30.

The easing index has helped the local currency gain in the last few weeks. Along with this, domestic economic developments such as India’s retail inflation staying below the Reserve Bank of India’s (RBI's) medium-term target of 4 percent, also aided the appreciation.

India's inflation eased to a 67-month low of 3.34 percent in March compared with 3.61 percent in the previous month, as food inflation declined further, according to data released on April 11.

March marks the second consecutive month that retail inflation remained below the RBI's target rate of 4 percent. The reading comes a week after the central bank delivered its second consecutive rate cut of 25 basis points.

Economists said that the local currency's appreciation is negative for exporters.