Rupee near 95.08 as RBI cites FCNR(B) inflows

RBI Governor Sanjay Malhotra said he expects more foreign exchange inflows ahead and pointed to the FCNR(B) buffer as a source of support. The comments come as the rupee has firmed by as much as 39 paise and was recently quoted around 95.08 per dollar, a move that traders have linked to softer crude prices and continued hedging by importers.

The market reaction has been constructive. On Adalytica’s FX volatility signals, the gauge is flashing extreme greed, reflecting a sharp pickup in trading interest over the past week. That suggests investors are positioning for a period of stronger currency stability, even if the move is not yet a clean trend break.

India’s broader equity exposure to the currency narrative is also improving. The INDA ETF has recovered toward the 50 level after a late-March washout, with its 50-day moving average now above the 200-day average and RSI readings back in positive territory, though still below the overheated levels seen during earlier rallies. That points to a market that is regaining confidence in India’s macro backdrop, but is not yet pricing in a full-blown currency breakout.

The bull case for the rupee is straightforward: stronger inflows, lower oil prices and a central bank that is more comfortable with appreciation should reduce pressure on the exchange rate. The bear case is that the move may prove fragile if dollar strength returns, global risk appetite fades or import demand picks up faster than inflows.

For investors, the key implication is that a sturdier rupee can ease the earnings drag for import-heavy sectors and help temper inflation expectations, while exporters and companies with large dollar revenues could see a modest translation headwind. The next test will be whether the RBI’s anticipated inflow cushion turns into sustained supply in the spot market rather than a temporary relief rally.