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The rupee traded in a narrow range in morning trade on Thursday (May 22, 2025), as the support from weak dollar index was negated by elevated crude oil prices and persistent dollar demand from importers and foreign banks.

Forex traders said broad-based dollar weakness, with DXY falling to a 99 level, is expected to act as a tailwind for the rupee in the short-term. However, the narrowing yield differential between Indian and U.S., is making Indian assets less attractive.

At the interbank foreign exchange market, the rupee opened at 85.59 then touched an intraday high of 85.58 and a low of 85.67 against the U.S. dollar.

On Wednesday (May 21, 2025), the rupee settled at 85.58 against the greenback.

“Indian rupee fell to 85.70 on Wednesday before closing at 85.58 on constant demand from oil companies and importers. The oil companies were probably buying to fill strategic reserves,” Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP said.

Meanwhile, the dollar index, which gauges the strength of the greenback against a basket of six currencies was trading 0.06% down at 99.49.

“Surging U.S. bond yields, with 20-year yields spiking to 5.131% and 10-year yields climbing to 4.607%— both multi-month highs— are rattling global investors. The moves come amid growing fears that the U.S. tax and spending bill could add over $5 trillion to the deficit by 2034,” CR Forex Advisors MD Amit Pabari said.

Brent Crude, the global oil benchmark, was trading 0.03% higher at 64.93 per barrel in futures trade amid rising geopolitical tensions in the Middle East, further adding pressure to the rupee.

On the brighter side, the Chinese Yuan and Japanese Yen have started appreciating against the dollar, offering a measure of support to the rupee, Pabari said, adding that broad-based dollar weakness is expected to act as a tailwind for the rupee in the short-term.

Technically, USD/INR is expected to trade in a range as it faces strong resistance near 85.80, while immediate support lies at 85.20-85.30 levels, he added.

In the domestic equity market, the 30-share BSE Sensex declined 800.99 points, or 0.98%, to 80,795.64, while the Nifty fell 251.25 points, or 1.01%, to 24,562.20.

Foreign Institutional Investors bought equities worth ₹2,201.79 crore on Wednesday.