The Indian rupee was trading 0.49% higher at ₹92.91 against the US dollar on Friday, April 10, compared to ₹92.45 at the previous currency market close, according to Upstox and Investing.com data. This represents a significant improvement from the ₹93 level seen earlier in the week, with the currency showing resilience amid ongoing market volatility. The rupee's recovery comes as traders expect high volatility ahead of the Reserve Bank of India's deadline for banks to curb their overnight positions.
The rupee's recent gains are attributed to RBI curbs that are currently in effect, as reported by Upstox and PTI. The central bank introduced position limits for banks and corporates to curb arbitrage between the onshore and non-deliverable forward (NDF) markets, prompting banks to unwind positions and sell dollars in the domestic market. However, an estimated 80-85% of these positions have already been unwound, according to CR Forex Advisors' Managing Director Amit Pabari, meaning the bulk of supportive flow is now behind us. As Pabari noted, "the cushion that held the rupee steady is beginning to thin," marking a shift in the currency's support structure.
US President Donald Trump warned Iran could be "taken out" if it misses his Tuesday night deadline to reach a deal, threatening to rain "hell" on Tehran unless it agrees by 8 p.m. EDT Tuesday (midnight GMT) to reopen the Strait of Hormuz, as reported by The Hindu BusinessLine. Brent crude contract for June delivery climbed to $111 on Tuesday, reflecting escalating geopolitical tensions. The rupee remains vulnerable to any escalation in the conflict, which could push oil prices further higher. MUFG Bank noted that "overall, our continued assessment is that the path towards peace is narrow and unlikely, given the wide gap in expectations among the different parties in this war."
Looking ahead, experts suggest the position of the domestic currency is likely to change with NOP-related support fading amid elevated risk for global uncertainties, according to PTI reports. The dollar rates were trading higher as the US-Iran ceasefire remains fragile amid reduced demand for safe-haven assets in the market. Despite India's strong buffers in the form of foreign exchange reserves and a stable banking system, pressure points are slowly building amid foreign investors' outflow from the Indian market. As Pabari highlighted, "with most of the NOP-related support now fading and global uncertainties still elevated, the scope for further strength seems limited."
Foreign institutional investor (FII) selling remains a significant concern, with March witnessing heavy outflows of nearly ₹1.2 lakh crore—among the highest monthly withdrawals in recent years. This compounds the broader outflow trend, with data showing outflows of nearly $1 billion on Thursday, following withdrawals exceeding $12.5 billion in March. Market participants noted that while near-term support from regulatory measures may persist, the broader outlook for the rupee remains sensitive to global cues, particularly oil price movements and capital flows. Analysts believe markets will remain sensitive to multiple factors, including geopolitical developments, crude oil price movements, FII flows, and global macroeconomic data.
