21 Aug 2025 : The Indian rupee appreciated by 14 paise to open at ₹86.93 against the U.S. dollar in early trade on Thursday, supported by a softer greenback and steady inflow of foreign funds into domestic markets.
Supportive Market Sentiment
At the interbank foreign exchange market, the rupee opened stronger at 86.93 compared with the previous close of 87.07. Traders attributed the upmove to a combination of factors, including a weaker dollar index, moderate crude oil prices, and sustained buying interest from foreign portfolio investors (FPIs).
The dollar index, which measures the greenback’s strength against six major currencies, was hovering near 103.4, retreating from its recent highs as markets awaited fresh U.S. economic data and Federal Reserve policy signals.
Foreign Inflows Boosting Currency
Market participants noted that consistent foreign capital inflows into equities and debt have offered much-needed support to the rupee. Over the past week, FPIs have been net buyers in Indian markets, drawn by strong corporate earnings, resilient macroeconomic indicators, and the Reserve Bank of India’s (RBI) measured stance on inflation and growth.
Crude Oil Prices and Trade Balance
Brent crude futures were trading around $82 per barrel, easing from earlier levels and providing relief for India, the world’s third-largest oil importer. Softer oil prices help reduce import bills and improve trade balance, indirectly strengthening the rupee.
Analysts believe the near-term direction of the currency will remain closely tied to global crude movement and foreign investor behavior.
Global Cues in Play
Investors are now awaiting the release of the U.S. Federal Reserve’s minutes, which could shed light on the future interest rate trajectory. Any dovish signals could further weaken the dollar, creating more room for emerging market currencies like the rupee to gain.
Asian markets were trading on a positive note, mirroring optimism in global equities. A stable equity market also tends to support the local currency by boosting investor confidence.
Expert View
Currency analysts expect the rupee to trade in a narrow range between 86.80 and 87.20 in the near term. “With the dollar showing signs of cooling and oil prices relatively steady, the rupee has short-term support. However, global risk sentiment and FPI flows will remain crucial triggers,” said a senior forex dealer at a leading private bank.
The RBI, which has been actively monitoring exchange rate volatility, is expected to step in if sharp fluctuations occur, ensuring stability in the domestic currency market.
Summary
The rupee gained 14 paise to open at ₹86.93 against the U.S. dollar in Thursday’s early trade, buoyed by foreign fund inflows, a weaker dollar index, and stable crude oil prices. Brent crude eased near $82 per barrel, improving India’s trade outlook, while the dollar weakened ahead of U.S. Fed minutes. Market analysts expect the rupee to trade in a tight range of 86.80–87.20 in the short term, with investor flows and global cues remaining key factors. The RBI is likely to intervene if needed to curb volatility, while the overall sentiment remains cautiously positive for the domestic currency.