Rupee among Asia's top performing currencies as AI trade cools
The Indian rupee has gained considerable strength in FY27, aided by increased foreign portfolio investor inflows. A notable decline in crude oil prices has also positively impacted the rupee's performance. Experts believe the Reserve Bank of India will manage the currency's appreciation to rebuild its foreign exchange reserves. Recent interventions in the currency market have capped further gains…
Mumbai: The Indian rupee has emerged as one of Asia's top performers in the fiscal year, outpacing currencies like South Korea's won and China's renminbi, which have benefited from AI-related investments. Experts attribute the rupee's gains to India's role as a natural hedge against AI-heavy trades and a recent retreat in crude oil prices, which have benefited the local unit.
The rupee has gained 0.97% this fiscal year, while the won appreciated over 11% and the renminbi gained 3.06%. However, the Indonesian rupiah remains at the bottom of the list, having weakened by 6.24%. Foreign portfolio investor inflows have increased, contributing to the rupee's appreciation. Gaura Sengupta, chief economist at IDFC First Bank, suggests that the rupee could appreciate further if there is a de-escalation in US-Iran tensions or a correction in AI stocks.
Foreign investors have been net buyers of Indian equities, with around ₹38,971 crore invested in the secondary market. The rupee ended last fiscal year at 94.83 against the dollar, a significant improvement from its record low of 96.96/$ in late May. RBI's foreign exchange management strategy in the coming years may focus on rebuilding its dollar reserves by accumulating foreign currency whenever capital inflows improve, rather than allowing a sharp appreciation in the rupee.
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