Rupee Emerges Stronger Among Asian Peers: Here’s a Look at Key reasons

The Indian rupee remained under pressure throughout the financial year 2024-25 owing to various domestic and global factors. However, it saw few recoveries in March, making the currency among stronger Asian peers.

As per Bloomberg, the rupee appreciated 0.22% against the greenback by March-end 2025. Other currencies including Taiwanese dollar, Chinese renminbi and Malaysian ringgit appreciated by 0.01%, 0.58% and 0.76% respectively.

Notably, the rupee hit its three-month high in March.

The appreciation in the rupee can be attributed to a slew of factors. Here’s a look at a few.

FPI inflows

The debt (bond) as well as the equities market witnessed a lot of support from foreign institutional investors. As per the data compiled by Clearing Corporation of India Ltd (CCIL), foreign investments in government securities under the fully accessible route (FAR) surged by ₹21,000 crore in March this year. Additionally, foreign institutional investors (FIIs) turned net buyers in Indian equities.

CareEdge said in a report on March 27, “FPI flows have also improved. In March 2025, there have been net FPI inflows of $2 billion, following two consecutive months of outflows. These inflows were driven by a pickup in debt inflows, while outflows from equities moderated.”

Weak dollar index

The dollar index fell to 104.162 on April 1, from 106.747, as on March 3.

When the dollar index is down, the rupee appreciates and this in turn increases foreign inflows in India. The dollar index is a measure of the value of the US dollar against the Euro, Japanese Yen, Pound Sterling, Canadian Dollar, Swedish Krona, and Swiss Franc, with varying weights to each of these currencies.

Trade deficit data

India’s trade deficit data also has a positive bearing on the local currency. Though India is a net importer of US dollars, containing trade deficit within the permissible limit is considered beneficial for the rupee.

In February, India’s trade deficit narrowed to $14.05 billion, clocking a rare overall trade surplus of $4.5 billion. In January, the deficit came to $23 billion. On a YoY basis, the trade gap in goods narrowed, compared to $19.51 billion in February 2024.

The trade deficit was also the lowest in February since August 2021. Merchandise exports in February fell by 10.9% in February on a YoY basis to $36.91 billion, while imports decreased by 16.35% to $50.96 billion, Ministry data showed.