More Stories

Informist, Monday, Feb. 3, 2025

By Gowri Lakshmi

MUMBAI- After slumping below the psychologically crucial 87-per-dollar mark, the rupee ended at a record closing low against the dollar on Monday due to a surge in the dollar index, dealers said. Banks' dollar buys on behalf of foreign portfolio investors and importers also weighed on the Indian unit, they said. The rupee hit a record low of 87.2825 a dollar during the day. 

"At this point, it's very hard to predict the pace of the rupee's movement, but the depreciation is certain. The growing uncertainty regarding US tariff policies and the possible RBI rate cut this week definitely weighs on the unit. Plus, the drag on all Asian currencies is pulling the rupee down," a dealer at a public sector bank said.

However, some state-owned banks' dollar sales, likely on behalf of the Reserve Bank of India, prevented the rupee from falling further, according to dealers.   

After depreciating 0.7% against the US unit, the rupee ended at a record closing low of 87.1850 against the greenback, compared to its previous close of 86.6050 on Friday. Other Asian currencies depreciated 0.4%-1.2%, with the Taiwan dollar being the worst performer among its peers.

The rupee breached the psychologically crucial 87-per-dollar mark for the first time and opened sharply lower at 87.0300 as the dollar index soared after US President Donald Trump on Saturday issued orders to impose tariffs on Canada, Mexico and China. The Trump-led US administration imposed 25% tariff on imports from Canada and Mexico and 10% tariff on imports from China, to be effective from Tuesday. 

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies was at, 109.50, compared to its previous close of 108.50 on Friday and 108.18 on Thursday. 

Shortly after opening, the domestic unit was dragged to its lifetime low of 87.2825 a dollar as banks rushed to buy the greenback on behalf of importers, who were wary of further fall in the Indian unit. The rupee opened over 42 paise lower against the dollar Monday. 

"Importers are back in their panic buying (of dollars) scenes as they see multiple triggers now in the FX market. Investors are anxious because Trump is yet to announce the second list of countries he would put tariffs on, there is a high chance India will be severely impacted," a dealer at a public sector bank said.

Some traders were also cautious ahead of the RBI Monetary Policy Committee's decision on Friday, when the panel is widely expected to lower interest rates for the first time since the pandemic. "A rate cut is now certain given the rupee liquidity crunch we have, that is a weighing factor," a dealer at a brokerage firm said.

Some dealers said the rupee was under pressure as overseas investors continued their exodus from the Indian stock market. Till Jan. 30. this calendar year, foreign investors have net sold $8.4 billion worth of shares from the domestic equities market. Both the benchmark indices, the Nifty 50 and the BSE Sensex ended in the red on Monday, down 0.5% and 0.4%, respectively. 

Some banks stepped in with dollar sales, likely on behalf of the RBI, preventing the rupee from falling further and curbing excessive market volatility. Dealers said that the nature of the RBI's intervention continued to be mild. Market participants said the pace of the rupee's fall has increased after Sanjay Malhotra took charge as the RBI governor on Dec. 11. So far this year, the rupee has depreciated 1.8% against the US unit. 

FORWARDS 

Premiums on the dollar/rupee forward contract ended higher across tenors Monday as importers rushed to purchase the greenback for forward delivery, noting a slump in the rupee in the spot market, dealers said.

With the Indian currency falling further after opening, importers rushed to purchase forward dollars as they expected the rupee to fall more, dealers said. The one-year dollar/rupee forward premium rose to hit a near two-week high on Monday, before falling slightly.

A few dealers speculated that the Reserve Bank of India sold forward dollars to offset the impact of its spot dollar sales on rupee liquidity. This also capped forward premiums, dealers said. 

Rising expectations of a 25-basis point rate cut by the RBI on Friday capped a rise in forward premiums, dealers said. The benchmark 10-year US Treasury yield rose on Friday, which also capped the upward movement in forward premiums, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 199.70 paise, against 195.29 paise on Friday. On an annualised basis, the premium was 2.29%, against Friday's close of 2.26%. 

OUTLOOK 

On Tuesday, the rupee will take cues from the movement in the dollar index, dealers said. It may also take cues from the movement in the Chinese yuan, as financial markets in China will resume on Tuesday after being shut for a week on account of Lunar New Year. 

Dealers expect banks to purchase the greenback on behalf of importers, fearing further fall in the rupee. "The rupee will be weighed, but there is a likelihood of the market correcting itself and the levels may come down to below 87.10 against the dollar," a dealer at a state-owned bank said.

They also expect overseas investors to withdraw funds from the Indian market, given the risk-off appetite amid global uncertainties. 

However, dealers also expect the central bank to step in with its dollar sales to prevent the rupee from falling sharply and to curb excessive market volatility.

During the day, the rupee is seen in a range of 87.00-87.50 a dollar, with strong technical support pegged at 87.30 a dollar.

India Rupee - World FX: Dollar index surges after Trump's tariff measures

MUMBAI – The dollar index soared after US President Donald Trump Saturday ordered the imposition of tariffs on Canada, Mexico, and China. Trump imposed 25% tariff on imports from Canada and Mexico and 10% tariff on imports from China. Taking into account the concerns of the energy sector, Trump said petroleum imports from Canada would face a lower 10% tariff. He imposed tariffs on Canada and Mexico, asking them to control drug trafficking and illegal immigration. The tariffs come into force Tuesday.

In response, Canada announced a 25% retaliatory tariff on the US. "We don't want to be here, we didn't ask for this," Prime Minister Justin Trudeau said. "But we will not back down in standing up for Canadians." The Canadian dollar was down 1% against the US unit following the news.

At 1557 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 109.48, compared to its previous close of 108.50 Friday and 108.18 Thursday. Following the surge in the dollar index, the euro plummeted 1.1% against the greenback. The pound sterling was down 0.7% against the US unit. The Bank of England's policy outcome is due Thursday, where it is likely to lower interest rates by 25 basis points.

The Australian dollar and the New Zealand dollar were down 1.1% and 1.2%, respectively, against the greenback after the tariff order on China. Any change in the Chinese economy directly influences the Australian dollar and the New Zealand dollar owing to the close bilateral trade relations of the two countries with the world's second-largest economy. However, losses in the Australian unit were limited after data Monday showed the manufacturing Purchasing Managers' Index was revised higher to 50.2 in January from the preliminary reading of 49.8. A reading above 50 indicates an expansion of economic activity.

The Japanese yen was down 0.2% against the US unit. Losses in the currency were limited after the Bank of Japan's summary of opinions, published earlier in the day, showed the central bank's policymakers discussed potential rate hikes with some warning of upside inflation risks. The summary highlighted the increasing likelihood of Japan's central bank continuing to increase borrowing costs in a phased manner.

"If economic activity and prices remain on track, it will be necessary to continue hiking rates accordingly, so that the negative range of real interest rates will shrink," the summary cited a policymaker saying.  (Gowri Lakshmi)

India Rupee: Remains sharply down as importers, FPIs buy dlrs; RBI limits fall

MUMBAI – The rupee remained sharply down against the greenback Monday as banks persistently bought dollars on behalf of importers and foreign portfolio investors, dealers said. However, some state-owned banks' dollar sales, likely on behalf of the Reserve Bank of India, limited further fall in the Indian unit, they said. The rupee fell to a record low of 87.2825 a dollar earlier in the day. 

"The market is very unpredictable today. The dollar index is definitely the weighing factor, putting immense pressure on all EMs' (emerging markets') currencies," a dealer at a state-owned bank said. 

The dollar index surged after US President Donald Trump on Saturday imposed 25% tariff on imports from Canada and Mexico and a 10% tariff on imports from China. At 1355 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 109.68, compared to its previous close of 108.50 on Friday and 108.18 on Thursday. 

Banks rushed to buy dollars on behalf of importers, fearing further depreciation in the Indian currency, which also weighed on the rupee, dealers said. The rupee has slumped 0.6% against the dollar so far Monday. 

Banks also purchased the greenback on behalf of foreign portfolio investors, who looked to withdraw funds from the Indian stock market, according to dealers. In January, foreign investors net sold $8.4 billion worth of shares from the domestic equities market. At 1355 IST, the benchmark indices, Nifty 50 and the Sensex, were down 0.7% and 0.6%, respectively. 

Meanwhile, some state-owned banks stepped in to sell dollars, likely on behalf of the RBI, which prevented the Indian unit from falling further and curbed excessive volatility, dealers said. However, the nature of the central bank's intervention remained "mild", they said. "They (RBI) are not standing in the way of the depreciation, but just cushioning it a bit," said a dealer at a foreign bank. 

Dealers said market participants are watchful of multiple factors, both globally and domestically, including a likely rate cut by the RBI's Monetary Policy Committee on Friday and the potential inclusion of India in the next list of countries that the Trump-led US will impose tariffs on.

For the rest of the day, the rupee is seen moving in a range of 87.10-87.40 against the dollar. Dealers see immediate technical support for the Indian unit at 87.30 a dollar.  (Gowri Lakshmi) 

India Rupee: Technical Levels for rupee - Feb 3

MUMBAI – At 1230 IST, the rupee was at 87.0875 per dollar. At 0900 IST, the rupee was at 87.0300 a dollar against its previous close of 86.6050. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi and Pratiksha)

India Rupee - Asia FX: Most fall as dollar index surges; Taiwan dlr down 1.7%

MUMBAI – Most Asian currencies slumped as the dollar index strengthened after US President Donald Trump imposed tariffs against Mexico, China and Canada. On Saturday, the Trump-led US administration imposed a 25% tariff on imports from Canada and Mexico and a 10% tariff on all imports from China. Investors also assessed several data points from across Asia.

At 0946 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 109.73, compared to its previous close of 108.50 on Friday and 108.18 on Thursday. Tracking a surge in the dollar index, the Taiwan dollar was down 1.7%. The Taiwan dollar also came under pressure as its stock market slumped, falling by over 3.5% on Monday so far.

The South Korean won was down 1.0% against the dollar. However, data from South Korea showed that the industrial production index rose 1.7% in 2024, compared to a rise of only 1.0% in the previous year, which limited the fall.

The Thai baht fell 1.1% against the greenback. On Friday, the central bank of Thailand said the country's economy slowed in December last year on a monthly basis due to weaker exports and manufacturing. This weighed on the Thai currency.

The Indonesian rupiah was down 0.9% against the greenback after inflation in the country slowed in January. Data showed that the annual inflation rate in January was 0.76% against the expectation of a 1.88% rise in consumer prices, and against the previous month's figure of 1.57%. The inflation was below the central bank's target range of 1.5-3.5%.

Financial markets in China remained shut on account of the Chinese Lunar New Year and will open on Tuesday. The Caixin/S&P Global manufacturing purchasing managers' index came lower at 50.1 in January against the market consensus of 50.5. 

The Philippines peso was down 0.5% against the dollar, triggered by the expectation of a rate cut by the central bank of the Philippines. "I think that sounds about right, 25 bps (in the) first half, 25 bps (in the) second half. Not every meeting we'll see a policy rate decline," Bangko Sentral ng Pilipinas Governor Eli M. Remolona was quoted by the media on Friday. The Philippines' Central Bank will announce the monetary policy decision on Feb. 13.  (Gowri Lakshmi)

India Rupee: Slumps below 87/$1 as dollar surges post Trump's tariffs measures

MUMBAI – The rupee slumped below 87 per dollar and hit record lows in early trade Monday due to a surge in the dollar index after US President Donald Trump announced tariffs on Canada, Mexico, and China, dealers said. Expectations of a rate cut by the Reserve Bank of India on Friday also weighed on the rupee, dealers said.

"It (rupee) is down largely because of the dollar index, and since there is no intervention we are seeing only dollar demand," a dealer with a large state-owned bank said. The rupee plummeted, when it opened more than 40 paise lower, and continued to fall because of persistent dollar purchases by importers, dealers said.

A sharp rise in the dollar index weighed on the Indian currency, dealers said. The index strengthened after Trump, on Saturday, ordered 25% tariffs on goods imported from Mexico and Canada, and 10% tariffs on imports from China. Taking into account concerns of the energy sector, he said crude oil imports from Canada would face a lower 10% tariff.

Trump imposed tariffs on Canada and Mexico, asking them to control drug trafficking and illegal immigration. Tariffs will come into force from Tuesday. In response, Canada also announced a 25% tariff on imports from the US.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 109.86 at 0925 IST against 108.50 on Friday and 108.18 on Thursday.

Dealers said despite such a sharp fall in the rupee, the RBI's intervention in the foreign exchange market was mild. Importers persistently purchased the greenback, fearing the rupee may fall more in the absence of the RBI's intervention.

For the rest of the day, the rupee is seen moving in a range of 87.00-87.70 against the dollar. Dealers see immediate technical support for the Indian unit at 87.50 a dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Feb 3

MUMBAI – Following are the expected support and resistance levels for the rupee on Monday, as forecast by leading banks and brokerages in an Informist poll:

(Sourabh Kumar and Pratiksha)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.