Indian Rupee Surges Past 85/USD as Central Bank Stays Silent

The Indian rupee surged past the 85 mark against the US dollar, catching traders off guard as the Reserve Bank of India (RBI) refrained from intervening. The currency peaked at 84.9675 in early trading on Friday before settling at 85.2650, marking a 0.2% gain for the day.

The rupee's rise comes amid a weaker dollar, driven by concerns over US tariffs and global recession risks. Seasonal and portfolio dollar inflows in March had already strengthened the rupee, and the rally has now extended into April. Market participants were surprised by the RBI’s inaction, as the central bank had previously stepped in to buy dollars during periods of rupee appreciation.

Economists suggest the RBI’s decision could signal a shift toward a more expansionary monetary policy to support economic growth. With India negotiating a trade deal with the US, valuation gains on foreign exchange reserves have reduced the urgency to intervene in currency markets.

Meanwhile, expectations of rate cuts by the RBI have increased, as major banks forecast policy easing to counter potential economic slowdowns. Despite these factors, analysts caution that the global impact of US tariffs could eventually weigh on the rupee, aligning it with other regional currencies.

Barclays advises taking a long position on the 3-month dollar-rupee non-deliverable forward, setting a target of 90, as markets continue to adjust to the shifting economic landscape.