USD vs INR: The Indian Rupee bounced back strongly after hitting a record high of 91.07 against the US Dollar (USD). The Indian National Rupee (INR) appreciated for the third straight session on Friday and finished at 89.59, recovering over 1.60% against the record high. According to stock market experts, the Indian Rupee appreciated on Wednesday and Thursday following the Reserve Bank of India’s (RBI) aggressive selling of the USD. Friday’s escalation in the INR can be attributed to the Bank of Japan’s decision to hike interest rates. They said that the Bank of Japan’s interest rate decision is expected to put pressure on the US dollar, leading to a pause in the FIIs’ selling in the Indian stock market.
Will the Bank of Japan turn out to be Santa Claus for the Indian Rupee?
On how this Bank of Japan’s decision on interest rate would impact the Indian Rupee, Avinash Gorakshkar, a SEBI-registered fundamental equity expert, said, “The Bank of Japan has increased interest rates, which is historic. It would put the US Dollar under pressure, which may trigger a pause in FIIs’ buying, who have remained net sellers in the Indian stock market since July 2025. If this happens, there will be no need for the RBI to sell more US Dollars.”
On how FIIs’ pause in Indian stock selling would strengthen the Indian Rupee, Anuj Gupta, Director at Ya Wealth, said, “A pause in FIIs’ selling would stop outflow in the US Dollar from India, which would strengthen India’s Dollar reserves. It would be interesting to know that for a strong Indian Rupee, the average Dollar reserve for Indian imports is 11 months, which has decreased after the recent decline in the Indian Rupee. The INR has fallen around 6% in YTD against USD, which brought down the Indian Dollar reserve for essential imports like crude oil, etc.”
Anuj Gupta stated that the appreciation in the Indian Rupee may continue, and the INR may soon reach the 89 and 88.70 levels against the USD.
Has Santa Rally begun on Dalal Street?
On how Bank of Japan’s decision on interest rate hike would impact the Indian stock mnarket, Seema Srivastava, Senior Research Analyst at SMC Global Securities, said, “Globally, Japan’s rate increase represents a gradual shift away from ultra-easy monetary policy, which can marginally tighten global liquidity and raise volatility in carry trades, but its impact is likely to be slow and measured rather than disruptive for Indian equities. In the US, market direction continues to hinge on Federal Reserve policy and economic data; a soft-landing scenario with cooling inflation and moderate growth remains supportive for risk assets, while any sharp rise in bond yields or renewed inflation fears could trigger short-term risk aversion across emerging markets.”
The SMC expert stated that the Indian Rupee has remained relatively stable despite bouts of dollar strength, supported by robust foreign exchange reserves and manageable current account dynamics, which reduces the risk of sudden capital outflows. Commodity prices are another key variable, and the absence of a sustained spike in crude oil prices is a positive for India, as it helps keep inflation, fiscal pressure, and corporate input costs under control. At the same time, base metals indicate steady but not overheating global demand.
“Domestically, India continues to stand out with comparatively strong GDP growth, improving private and public capex cycles, healthy banking system balance sheets, and reasonable earnings visibility across financials, infrastructure, and manufacturing,” Seema added.
Nifty 50 rebounds from 52-DEMA support
On Nifty 50 rebound from recent low, Seema Srivasta, a professional CA, said, “The next leg of the rally will need to be earnings-led rather than liquidity-driven. Overall, the rebound from the 50-DEMA increases the probability of a gradual market rally. Still, its sustainability will depend on stable global conditions and consistent domestic earnings delivery rather than a sharp, straight-line up move.”
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
