The Indian rupee witnessed sharp gains on Friday at below 85 against dollar, as the dollar index and oil prices dropped sharply amid concerns over recession in the US economy after the reciprocal tariffs were announced.

It is for the first time since December 2024 when rupee traded below 85 against dollar. At the beginning of the trading session, the rupee opened at 85.04 and in the early trade, it stood at 84.99, almost 40 paise up from the previous close of 85.44.

The reason for the rise in rupee against dollar is attributed to the weakening of dollar index due to the reciprocal tariff imposed by US President Donald Trump and the fall in crude oil prices.

Since Trump announced the tariffs, the dollar index, which shows the strength of the US currency against the currencies of the world's six major currencies, has sharply declined -- around 101.70.

On Thursday, when the tariffs were announced, the dollar index stood at 104.

According to experts, the tariffs imposed by President Trump are more than expected, due to which there is a risk of the US economy going into recession and due to this, the dollar is becoming weak.

One reason for the strength of the rupee against the dollar is the sharp decline in crude oil. Brent crude remains close to 69.64 dollar per barrel.

India imports more than 80 per cent of its crude oil requirement, so whenever the price of crude oil falls, the country save a large amount of foreign money. It helps rupees to gain against dollar.

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said there has been a sharp recovery in the rupee against the dollar. Due to global cues and FIIs flow, the rupee can remain between 85 to 85.90 against the dollar. The performance of Indian rupee in FY25, when compared with other global currencies, was relatively stable, with a stronger dollar weighing on all major currency pairs.

Towards the end of the year, a reversal in dollar strength and FPI inflows into debt supported a rally in rupee, with the domestic currency recouping as much as 2.4 per cent in a single-month alone, according to a report by Bank of Baroda (BoB).