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The rupee rose 12 paise to 85.43 against the US dollar on Monday, buoyed by weak global cues and robust GDP data. Analysts await RBI’s rate decision and PMI data as markets remain volatile amid foreign fund outflows and high oil prices.

The rupee came under pressure due to rising global crude oil prices and weaker-than-expected domestic industrial output data for April. However, sustained foreign fund inflows and positive sentiment in domestic equities helped limit further losses, according to forex traders.

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The local currency also gained support from increased foreign fund inflows and the RBI's announcement of a record dividend payout to the government for FY25, according to forex traders.

Forex traders noted that the broad-based weakness in the dollar, with the DXY slipping to the 99 level, is likely to support the rupee in the short term. However, the shrinking yield gap between India and the US is diminishing the appeal of Indian assets.

According to forex traders, elevated global crude oil prices added to the downward pressure on the USD/INR pair. In early trade at the interbank foreign exchange market, the rupee opened at 85.65 and slipped to 85.67 against the US dollar, marking a decline of 9 paise from its previous close.

According to forex traders, escalating geopolitical tensions between India and Pakistan have triggered a risk-off sentiment in the market, contributing to the rupee's decline. Additionally, rising demand for the US dollar has further dampened investor confidence.

Early Wednesday, the Indian armed forces launched missile strikes on nine terrorist targets in Pakistan and Pakistan-Occupied Kashmir, targeting key locations such as the Jaish-e-Mohammad stronghold in Bahawalpur and the Lashkar-e-Taiba base in Muridke.

Forex traders noted that a steep drop in crude oil prices, along with a strong performance in domestic equities, boosted investor sentiment. Brent crude prices fell by nearly 4 percent in early Asian trading after OPEC+ indicated plans over the weekend to ramp up production in the coming months.

Forex traders noted that GST collections surged to a record ₹2.37 lakh crore in April, indicating strong domestic demand. Additionally, upbeat sentiment was supported by a rally in domestic equities, fueled by consistent foreign fund inflows.

According to forex traders, escalating geopolitical tensions between India and Pakistan have triggered a risk-off sentiment in the market, weighing on the rupee. However, steady foreign fund inflows and stable crude oil prices helped limit the domestic currency’s decline.

Forex traders said India is presenting a picture of quiet strength. The Reserve Bank of India, in its recent bulletin, emphasised India's growing economic resilience, driven by strong macro fundamentals, diverse trade ties, and rising global interest in Indian markets.

According to forex traders, market sentiment took a hit due to rising geopolitical tensions following a terror attack in Pahalgam, Jammu & Kashmir. On the international front, the US dollar index rebounded sharply, climbing from a recent low of 97.92 to 99.94. This recovery was fueled by renewed optimism over a possible easing of trade tensions between the US and China, they noted.

Forex traders noted that market sentiment improved after Donald Trump, on Tuesday, stepped back from his earlier threats to dismiss Federal Reserve Chair Jerome Powell, following days of escalating criticism over Powell’s reluctance to cut interest rates. Trump also hinted at the potential for reduced tariffs on Chinese goods.

According to the India Bullion and Jewellers Association (IBJA), the price of 24-carat gold rose sharply from Rs 96,670 to Rs 1,00,000 per 10 grams -- a jump of Rs 3,300 within 24 hours

According to forex traders, the local currency came under pressure due to weak sentiment in the equity markets and a modest rebound in crude oil prices. At the interbank foreign exchange, the rupee opened at 85.48 and eased to 85.54 against the US dollar in early trade, marking a 10 paise gain from its previous close.

Forex traders noted that encouraging macroeconomic data, combined with the 90-day relief from US reciprocal tariffs, spurred foreign investors to buy into domestic equities, which in turn boosted the local currency.

In early trade at the interbank foreign exchange, the rupee opened at 86.22 against the US dollar, marking a gain of 46 paise from its previous close. It later strengthened further to 86.17. On Wednesday, the local currency had settled at 86.68 against the greenback.

Forex traders noted that even with a sharp decline in crude oil prices and a weakening US dollar, concerns over a potential global trade war continued to spark fears of an economic downturn, triggering foreign fund outflows and leaving stock markets in a state of shock.

The rupee’s rebound has been driven primarily by a decline in crude oil prices and the weakening of the US dollar in global markets. According to forex traders, the greenback lost ground due to growing concerns over inflationary pressures, triggered by tariffs and the looming threat of a potential recession in the United States.