Rupee turns positive among Asian peers: Here are five supporting factors

Indian rupee

The Indian rupee has been under stress throughout financial year 2024-25 due to various domestic and global factors, but some recoveries were seen in March, and this turned the currency positive among Asian peers.

According to data collated from Bloomberg, the local currency appreciated 0.22 percent by the end of March 2025 against the US dollar. Apart from the rupee, the Taiwanese dollar appreciated 0.01 percent, Chinese renminbi by 0.58 percent, and Malaysian ringgit appreciated 0.76 percent against the US dollar.

The appreciation in March saw the rupee touching a three-month high.

There are multiple factors contributing to the appreciation and most of it were domestic ones. Here's more:

FPI inflows

The rupee received a lot of support from foreign investors in the debt as well as the equities markets. According to Clearing Corporation of India Ltd (CCIL) data, foreign investments in government securities under the fully accessible route (FAR) increased by Rs 21,000 crore in March this year. Also, foreign institutional investors (FIIs) turned net buyers in Indian equites.

“FPI flows have also improved. In March 2025, there have been net FPI inflows of $2 billion, following two consecutive months of outflows. These inflows were driven by a pickup in debt inflows, while outflows from equities moderated,” CareEdge said in a report on March 27.

Usually, inflows from foreign investors is positive for the rupee because it eases pressure from the market and leads to lesser intervention from the Reserve Bank of India (RBI).

The appreciating rupee and inflows also allow the central bank to mop up foreign currency and build its reserves, which they have spent during the depreciating period.

Weaker dollar index (DXY)

The dollar index (DXY), which measures the American currency's value against six major global peers, has fallen to 104.162 on April 1, from 106.747, as on March 3.

Whenever the dollar index falls, the rupee appreciates, and investors in the US and other countries see an opportunity for higher returns in India, leading to an inflow from foreign investors. The dollar index is a measure of the value of the US dollar against the Euro, Japanese Yen, Pound Sterling, Canadian Dollar, Swedish Krona, and Swiss Franc, with varying weights to each of these currencies. If the dollar index goes up, it is considered a sign of strength for the US dollar, and vice- versa.

Trade deficit data

India’s trade deficit data also has a positive bearing on the local currency. Being a net importer of US dollars, containing trade deficit within the guidance limit is considered good for the rupee as it indicates that the underlying economic macros are favourable for the currency and is unlikely to put the rupee under pressure in the foreseeable future.

India’s trade deficit narrowed to $14.05 billion in February, leading to a rare overall trade surplus of $4.5 billion. The deficit was nearly $23 billion in January. On a year-on-year (YoY) basis too, the trade gap in goods was narrower, compared to $19.51 billion in February 2024.

The commerce ministry said that the deficit in February is the lowest since August 2021 due to a decline in imports and exports relatively holding up. While merchandise exports fell 10.9 percent on-year in February to $36.91 billion, imports of goods decreased by a larger 16.35 percent to $50.96 billion, provisional data released by the ministry on March 17 shows.

Crude oil price

Easing Brent crude oil price in the last few weeks is also helping the rupee, as a fall in Brent crude oil prices in the international market reduces the demand from oil marketing companies. This leads to less pressure on the local currency. India's oil import dependence is over 80 percent.

According to Bloomberg data, Brent crude oil price has eased to $74 per barrel in March, from $80 per barrel in January.

“Crude oil prices are expected to remain favourable, ranging between $65 and 75 per barrel during FY26, driven by low demand, OPEC+ output hikes and the US’ push for higher oil production,” CareEdge said in a report.

Inflows from ECBs

The ability of Indian companies to tap overseas loans at competitive prices also helps in taming the rupee. In March, three companies have raised funds through external commercial borrowings (ECBs), in dollar terms, totalling $375 million. The issuances include those by Truhome Finance (formerly Shriram Housing Finance), SMFG India Credit, and Satin Creditcare Network.

Truhome Finance (formerly Shriram Housing Finance), on March 28, announced a syndicated social ECB of $100 million from DBS Bank and Sumitomo Mitsui Banking Corporation (SMBC).

On March 25, SMFG India Credit (SMICC) raised $175 million via ECB and Satin Creditcare Network raised a syndicated social term loan of $100 million via ECB on March 13 .