On Monday, the Indian rupee appreciated by 0.4% to close at 84.25 against the U.S. dollar, marking a notable gain. This uptick was primarily driven by a rally in the Chinese yuan and a significant decline in crude oil prices.

Chinese Yuan's Rally: The offshore yuan reached a near six-month high of 7.1876 against the dollar, buoyed by renewed optimism surrounding U.S.-China trade talks. Beijing's willingness to resume tariff discussions has positively impacted market sentiment across Asia.

Decline in Oil Prices: Crude oil prices fell more than 2% following OPEC+'s decision to accelerate oil output hikes, raising concerns about potential oversupply. This drop alleviated pressure on the rupee, as India is a major oil importer.

Despite the day's gains, the rupee's upward momentum was tempered by increased dollar demand from importers and a major foreign bank. Analysts suggest that the USD/INR pair may stabilize within the 85-87 range for the remainder of 2025, influenced by the domestic impact of U.S. tariffs and a softening dollar.

In the forward markets, the 1-year implied yield on the rupee declined by 9 basis points to 2.18%, reflecting reduced expectations of a Federal Reserve rate cut in June. Additionally, portfolio inflows and a reduction in bearish positions have contributed to the rupee's recent 2% appreciation over the past month.

Overall, while the rupee has shown resilience, ongoing global economic developments and domestic factors will continue to influence its trajectory in the coming months.