- The Indian rupee gained 84 paise to close at 94.94 against the US dollar on Friday
- The currency briefly surpassed 95, becoming the world's best performing currency that day
- Rupee's rise is seen as short-term relief, not a full reversal of prior currency stress
The Indian rupee is on track to erase all of its losses this week. The currency appreciated by 84 paise against the US dollar to close at 94.94 levels on Friday.
During the day the local legal tender strengthened by almost 1%, past 95 levels, to become world's best performing currency. However, it still remains 5% below the pre US-Iran war levels.
Experts believe Rupee's bounce back cannot be seen as a full reversal of the stress on the currency yet, just short-term relief from it on the back of RBI's dollar influx measures.
"The rupee's rebound to 94.94 per dollar is a relief signal, not yet a reversal signal. After touching record-low territory, the currency needed policy support, softer panic and some short-covering to stabilise. Today's bounce shows that the market is willing to respect RBI intervention and dollar-inflow measures, but the larger pressure points have not gone away," said Harshal Dasani, Business Head, INVAsset PMS.
The government introduced the Income-tax (Amendment) Ordinance, 2026 on June 5 and made effective retrospectively from April 1, 2026, granting eligible foreign investors an exemption on both interest income and capital gains earned from investments in government securities.
Foreign Institutional Investors and Foreign Portfolio Investors will no longer pay the 12.5 per cent long-term capital gains tax on listed G-Secs held for more than one year, nor the 20 per cent withholding tax on interest income that applied until now.
"The RBI's approach looks calibrated. It has avoided using interest rates as the first line of currency defence and is instead trying to smooth volatility through liquidity, reserves and measures that can attract dollar inflows. That matters because a rate-led defence of the rupee would have carried a growth cost," Dasani highlighted.
A stronger rupee gives breathing space to the market, while improving sentiment for import-heavy sectors, oil-linked users and companies with foreign currency liabilities. Although, the market will need confirmation that the rupee can hold below 95, crude can cool and FII selling can moderate, Dasani emphasised.
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