The Indian rupee posted its strongest weekly performance since January 2023, as a ceasefire between Iran and Israel eased oil prices and dampened demand for the safe-haven US dollar. Concerns over the future independence of the Federal Reserve also weighed on the greenback.
The rupee gained 1.3 percent over the week, its best showing in two and a half years, closing at 85.4750 per US dollar on Friday.
Crude oil prices fell more than 11 percent during the week after Iran and Israel agreed to a ceasefire following a 12-day conflict that had also seen involvement from the United States.
Meanwhile, the dollar index fell 1.5 percent over the week as investors, spooked by renewed signs of weakening independence at the US central bank, pushed the dollar to its lowest level in more than three years.
“Part of the sell-off of the dollar is due to the unpredictability of policy from Washington and that is unlikely to change,” MUFG Bank said in a note.
While the rupee rose this week, it continues to under-perform its Asian peers despite ongoing dollar weakness throughout 2025. Currencies such as the Korean won and offshore Chinese yuan have gained between 2 percent and 9 percent so far this year, while the rupee remains largely flat.
Bankers and analysts believe that while the rupee's under-performance is likely to continue, a broadly weaker dollar coupled with portfolio inflows should support the currency in the near term.
Foreign investors have turned net buyers of Indian government bonds in recent sessions, while block trades and initial public offerings have drawn renewed global interest.
