Rupee Posts Biggest Monthly Gain in 7 Years with 2.4% Rise

Quick Summary

• The Indian rupee recorded its best monthly gain (2.4%) in March 2025, rising to 85.47/dollar, marking the steepest appreciation since 2018.
• Overseas investors purchased nearly $4 billion worth of Indian financial assets in the last 10 days of FY25, driving this surge.
• Sovereign bond yields also fell sharply; the benchmark 10-year yield dropped to 6.57%, decreasing by three basis points on Friday and by a total of 15 basis points in March-the largest decline as May 2024.
• RBI conducted aggressive bond purchases worth ₹2.45 lakh crore through open market operations during FY25 to ease liquidity concerns and lower yields.
• Market participants expect softer yields ahead due to anticipated rate cuts following the April Monetary Policy Committee review meeting.
• Exporters hedged positions amid rupee appreciation but remain cautious about further moves as they await clarity post-FY26 commencement.

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!Rupee’s 2.4% gain best in a month over seven years chart
Source: ETMarkets.com

Indian Opinion Analysis

The recent rally for the rupee underscores renewed overseas confidence in India’s financial markets despite global economic uncertainty and tight monetary conditions internationally. Increased foreign investments signal optimism regarding India’s long-term growth trajectory amidst apprehensions about worldwide trade disruptions.

The softening of sovereign bond yields has direct implications for borrowing costs across sectors, which can encourage corporate expansion and strategy shifts that benefit from cheaper capital availability. The timing aligns with expectations for fiscal stability following RBI’s intervention strategies such as OMOs (Open Market Operations).

Key future considerations will center around RBI’s policy decisions on April 9-especially any changes to rates or stances-which could influence both currency appreciation momentum and yield trajectories further. While exporters weighed immediate hedging needs cautiously against rupee movements, sustained foreign inflows could reverse narratives within trade-dependent sectors if stability persists into FY26.

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