The Indian rupee strengthened by 12 paise to close at 85.1 against the US dollar on Monday amid various global and domestic economic factors influencing the currency markets.
The domestic currency opened 17 paise stronger at 85.05 against the US dollar amid a weaker US dollar and in line with other Asian currencies.
The dollar index is facing pressure after US President Donald Trump gave the European Union an extension for the tariffs until July 9. The dollar index was down 0.3% to 98.81. In the last week alone, the DXT has fallen 1.85%.
"With no clear policy direction and elevated uncertainty, global capital is now pivoting toward safer, higher-yielding destinations," said Amit Pabari, managing director of CR Forex Advisors.
This move towards safer destinations is favourable for Asian currencies, including Indian rupee, which is benefiting from both capital inflows and dollar weakness, according to Pabari.
Additionally, the Reserve Bank of India's recent surplus transfer of Rs 2.69 lakh crore to the government, marking a significant 27.4% increase over last year’s payout of Rs 2.1 lakh crore. "This has sparked expectations of more Open Market Operations in the second half of FY26 to manage liquidity and ensure bond market stability," he added.
Given these factors, the rupee is likely to face a strong resistance near 85.50 and 86.10 levels and every uptick should be used by exporters to increase their hedge ratio, while the immediate support would be 85.00-85.10. A breach below this support could pave the rupees path towards 84.50 levels, said Pabari.
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