Indian Rupee opens flat at 85.65/$ as weak Dollar caps decline

By Admin

22 May, 2025

The Indian Rupee (INR) opened flat on Wednesday at 85.65 against the US Dollar, registering a marginal depreciation of 1 paise from the previous close of 85.64 on Tuesday, according to Bloomberg data. The flat opening comes after the domestic currency snapped a two-day winning streak on Tuesday.

Rupee Performance and Market Factors

So far in the month, the rupee has weakened by over 1.3%, reflecting broader market volatility and external economic pressures. On Tuesday, the local unit faced selling pressure as oil companies stepped up dollar buying and foreign portfolio investors (FPIs) pulled out of Indian equities. FPIs sold over ₹10,000 crore in the cash market—the highest in more than three months.

“The selloff in stocks and increased dollar demand from oil firms dragged the rupee lower,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.

Global Cues: Dollar Index Weakness Supports Asian Currencies

Despite the rupee's weakness, the US Dollar Index offered some relief by falling below the 100 mark, down 0.44% to 99.67, as of the latest update. The index measures the greenback’s strength against a basket of six major currencies. Its decline provided some support to Asian currencies, many of which appreciated between 0.1% and 0.4%.

This decline in the dollar came on the back of cautious commentary from US Federal Reserve officials. St. Louis Fed President Alberto Musalem highlighted concerns about a potentially weakening US labour market and rising prices. Similarly, Atlanta Fed President Raphael Bostic echoed worries over inflationary trends. Meanwhile, the 10-year US Treasury yield rose back to 4.50%, although yields on shorter maturities remained largely unchanged.

Geopolitical Tensions and Oil Prices

Further pressure on the rupee came from rising global oil prices. Brent crude climbed 1.48% to $66.35 per barrel, while WTI crude edged lower by 0.21% to $62.56, amid escalating geopolitical tensions. Reports of Israel preparing for a potential strike on Iranian nuclear facilities spurred concerns of supply disruption in global oil markets.

“Firm global crude oil prices intensified the downside pressure on the currency,” said Amit Pabari, Managing Director at CR Forex Advisors. “The latest geopolitical developments may lead to a spike in oil prices, putting additional pressure on the rupee.”

Technical Outlook

From a technical perspective, analysts expect the dollar-rupee pair to encounter strong resistance near the 85.60–85.80 range, while the 85.20 level will act as a key support. These levels are likely to define the short-term trading range for the currency amid evolving global and domestic factors.

Conclusion

The Indian Rupee’s flat start at 85.65/$ reflects a tug-of-war between domestic pressures and supportive global cues. While dollar index weakness offers a cushion, concerns around foreign outflows, oil prices, and geopolitical risks could continue to weigh on the local currency in the coming sessions.