Despite the positive indicators, Bank of Baroda warns that renewed trade tensions between the US and China could reverse current trends.
The Indian rupee is likely to appreciate in the near term, driven by a combination of supportive domestic and international factors, according to a recent report by Bank of Baroda. The report forecasts the rupee to trade in the range of 84–85 per US dollar in the coming days. “We expect INR to trade with an appreciating bias in the near-term in the range of 84-85/USD. However, escalation in US-China trade relations poses a significant risk to our view,” the bank stated. The rupee appreciated by 1.1% in April 2025, building on a 2.4% rise in March.
Weaker US Dollar and Oil Prices Boost INR
The Bank of Baroda report attributes the rupee’s recent gains to a significant weakening of the US dollar, which declined amid a subdued economic outlook in the United States. Lower global crude oil prices also helped improve India’s trade balance, strengthening the rupee further. These factors contributed to the currency’s performance in March and April 2025.
Foreign Inflows Reflect Improving Investor Confidence
The report highlights a resurgence in foreign investor sentiment toward Indian equity markets. After three straight months of net outflows, April 2025 witnessed renewed foreign portfolio investment into Indian equities. Bank of Baroda points to this trend as a key support for the rupee. The shift reflects broader investor interest in emerging markets, with India emerging as a preferred destination due to its economic resilience.
US Trade Policy and Global Risk Appetite in Focus
Bank of Baroda notes that recent progress in US trade negotiations with global partners has improved market confidence. A softer tone from the US on tariff issues has eased concerns and boosted investor risk appetite. The report adds that this environment could aid recovery in foreign inflows to emerging market assets, including India’s.
Trade Tensions Remain a Key Risk
Despite the positive indicators, Bank of Baroda warns that renewed trade tensions between the US and China could reverse current trends. “Escalation in US-China trade relations poses a significant risk,” the report states. The bank concludes that the rupee remains supported, but global trade developments must be watched closely.
(With Inputs From ANI)
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