The rupee closed 66 paise stronger on Friday as the Dollar weakened as global tariff war gets more entrenched. However, the Indian unit posted its worst week in two months even as India’s forex reserves soared $10.872 billion during the week ended April 4.
Rupee closed at 86.04 per US Dollar against the previous close (Wednesday) of 86.70. The forex market was closed on Thursday on account of Mahavir Jayanti. Rupee ended the week 80 paise weaker vis-a-vis last Friday’s close of 85.24.
Kaushik Das, Managing Director, Chief Economist – India, Malaysia and South Asia, Deutsche Bank, noted that given the unprecedented uncertainty and volatility in the global economy, emanating from tariff-wars, financial stability remains a key focus area of central bankers across the world.
“As far as the Rupee is concerned, while it remains well behaved at this stage, there could be renewed pressure on INR, if CNY (Chinese Yuan) starts to depreciate meaningfully in the coming months, to retaliate against tariffs.
“In this regard, it may not make sense to cut the repo rates excessively in this cycle, in our view. We continue to forecast Rupee to end at 88 vs the USD by December 2025,” Das said.
Radhika Rao, Senior Economist, DBS Bank, noted that after a period of outperformance, the rupee’s gains are expected to be constrained by weak risk sentiments, correction in the capital markets, US dollar as well as Chinese yuan direction and authorities’ preference to rebuild foreign reserves after four months of drawing down on the stock.
Further, gradual FX depreciation might also act as a part shock absorber for the sharply higher reciprocal tariffs.
Meanwhile, India’s forex reserves jumped $10.872 billion in the reporting week ended April 4 to stand at $676.268 billion as on this date, providing an import cover of about 11 months.
Forex reserves in the reporting week were mainly buoyed by increase in foreign currency assets ($9.074 billion) and gold reserves ($1.567 billion).
The other two components of the reserves too rose — Special Drawing Rights (up by $186 million) and Reserve Position in the IMF ($46 million).
Published on April 11, 2025
