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Informist, Thursday, Jun. 12, 2025

By Pratiksha

MUMBAI - Weakness in the dollar index notwithstanding, the rupee ended lower against the dollar on Thursday as banks bought the greenback on behalf of oil marketing companies and foreign portfolio investors, dealers said. "The dollar index came down after the US CPI data, so it (dollar/rupee) should have ideally moved lower, but seems like it was not very fruitful. The rupee has become very flow dependent of late and that is what happened," a dealer at a big state-owned bank said. 

After rising to a high of 85.4250 a dollar earlier in the day, the Indian unit settled at 85.6000 on Thursday, against 85.5100 on Wednesday. With a depreciation of 0.1% against the dollar, the rupee was the worst performer amongst its peers. Other emerging market currencies rose 0.1-1.3% against the dollar tracking weakness in the dollar index, with the Taiwan dollar being the best performer. 

The rupee started the day higher against the US unit as the dollar index hit a near two-month low after data on Wednesday showed US inflation rose less than expected in May, leading to expectations of a rate cut by the US Federal Reserve at its September policy meeting. Data showed the US consumer price index increased 0.1% last month after rising 0.2% in April. Economists polled by Reuters had forecast the CPI rising 0.2%.

Lingering uncertainty over US President Donald Trump's tariff policies also weighed on the dollar index. Trump said on Wednesday he would be willing to extend the Jul. 8 deadline to conclude trade talks with countries before higher US tariffs could come into effect. The US would send out letters in coming weeks detailing the terms of trade deals to dozens of other countries, he added.

However, just two hours into trade, the rupee gave up all of its gains as banks rushed to purchase the greenback on behalf of oil marketing companies and other importers, in order to take advantage of the relatively lower dollar/rupee levels, dealers said. Some oil importers also bought the greenback, noting a spike in crude oil prices, they said.  

Crude oil prices rose almost 4% on Wednesday, hitting an over two-month high, on worries of supply disruptions in West Asia after Iran said it will strike US bases in the region if nuclear talks fail. At 1530 IST, the August Brent crude contract on the Intercontinental Exchange was at $68.78 per barrel, against $69.77 per barrel Wednesday and $66.87 per barrel Tuesday.

Further, some banks bought the greeback on behalf of foreign portfolio investors, looking to withdraw funds from domestic equities, which weighed on the local unit, dealers said. On Thursday, both the Sensex and Nifty 50 ended 1% lower each. So far in June, FPIs have pulled out funds worth $1.24 billion from Indian markets on a net basis.  

"Some FPI buying (of dollars) took rupee to 85.60-85.65, but we are seeing heavy resistance around there," a dealer at a state-owned bank said. "If these levels break, we may see rupee going to 85.70-85.80 levels. Till then, we may continue to see range bound movement."

The dollar index fell further during European trade as rising geopolitical tensions in West Asia and uncertainty related to the trade truce between the US and China pushed investors to shift to other safe-haven assets. This helped the Indian currency erase some of its losses, dealers said. 

At 1530 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 98.04, against its previous close of 98.58 and 99.05 Tuesday.

"We will see a lot of two-way volatility in rupee going forward. There is a lot of uncertainty from different fronts. You have uncertainty from Russia-Ukraine. You've got Trump's tariff issues. So the market will not settle down in my opinion," Ritesh Bhansali, deputy chief executive officer at Mecklai Financial Services said. 

Dealers expect exporters to remain on the sidelines and only step in to sell dollars if the rupee falls beyond 85.80 a dollar. Recent sharp decline in dollar/rupee forward premiums will also keep exporters from actively hedging, they said. 

FORWARDS

The one-year dollar/rupee forward premium ended higher as US Treasury yields declined Wednesday after a lower-than-expected rise in inflation in May led to expectation of a rate cut by the Federal Reserve as early as September, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

The yield on the benchmark US 10-year Treasury note fell 6 basis points to 4.41% on Wednesday. Traders now await the release of the May personal consumption expenditure index, the Fed's preferred inflation gauge, due later in the day. 

Meanwhile, some banks bought dollars for forward delivery on behalf of importers, noting the broadly lower forward levels, which also supported the forward premiums, dealers said. The one-year dollar/rupee forward premium has declined over 10 bps so far in June, and hit a near eleven month low of 1.77% on Monday.

Data released post market hours showed India's headline CPI inflation fell to an over six-year low of 2.82% in May as food prices continued to decline even as core inflation rose. At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 159.50 paise, against 158.00 paise at Wednesday's close. On an annualised basis, the premium was at 1.86%, against the previous close of 1.84%.
 

OUTLOOK

On Friday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said. The local unit may also take cues from movement in the Chinese yuan. they said.

Market participants await the release of the US May personal consumption expenditure index, due later in the day, for more cues on the Fed's interest rate path. They will also closely monitor further developments related to the US-China trade talks and Trump's tariff policies, dealers said. 

"Broadly, rupee is stuck in that 85.30-86.00 (a dollar) zone but it will not be stuck in that for a long time. The medium term range is 84.50-86.50," Bhansali said. "Overall, the rupee is going to be guided by what Trump is going to do. There should be lot of volatility due to that." 

Dealers expect the Reserve Bank of India to intervene in the domestic spot market by selling dollars in case the rupee inches close to the 86.00-per-dollar mark. The rupee is expected to trade between 85.40 and 85.80 against the dollar Friday. Dealers peg key technical support for the Indian unit at 85.80 a dollar. 

India Rupee - World FX: Tariff fears, strong euro push dlr index to 2-mo low

MUMBAI – The euro was up 0.7% against the dollar as the greenback weakened to a two-month low after US President Donald Trump said he would be sending letters to notify trading partners about the new unilateral tariff rates within the next one to two weeks. Trump said that he would clearly outline the terms offered, leaving other countries with the choice to accept or reject them. The announcement comes ahead of the July 9 deadline for sweeping "liberation day" tariffs and adds a layer of uncertainty, reviving US recession fears. 

The euro was also supported by comments from European Central Bank board member Isabel Schnabel, who said on Thursday, "the monetary policy cycle is coming to an end." This statement iterates President Christine Lagarde's comments earlier this month, where she said that interest rates in the Eurozone are near neutral now, hinting at a pause in the rate-cutting cycle. 

On the other hand, the Federal Reserve is expected to reduce rates by 25 basis points at its meeting in September. FedFund futures estimate a probability of 70% for a cut at that meeting. 

The pound sterling was up 0.2% against the dollar despite dismal growth data from the region. The UK GDP fell by 0.3% in April, compared to a 0.1% decline expected, while the industrial data missed forecasts, exerting downward pressure on the currency. 

The Japanese yen was up 0.6% against the dollar. Japanese Prime Minister Shigeru Ishiba said he is not pursuing a particular timeline to reach a deal with the US and that their way of dealing with such things is "different". Japan's Chief Trade Negotiator Ryosei Akazawa said that he is not aware of any discussions on US Treasuries and that Finance Minister Kato will lead any negotiation on that topic.

At 1543 IST, the dollar index, which measures the dollar's strength against a basket of six major currencies, was at 98.06, lower than its previous close of 98.58 and 99.05 Tuesday. (Kabir Sharma)

India Rupee: Dn on importers' dlr buys; broad-based weakness in dlr supports

MUMBAI – The rupee was down against the dollar on Thursday as oil marketing companies purchased the greenback due to fears of further appreciation in prices of crude oil, dealers said. However, the Indian unit was supported by a broad-based weakness in the dollar after US President Donald Trump said he would be willing to extend the pause on reciprocal tariffs if necessary, dealers said. 

"There is heavy buying from oil companies today (Thursday), they were on the sidelines for the past 2-3 days hoping for prices to come down. Prices (of crude oil) have now gone from $60 to $70 a barrel in a month so they are panicking and stocking up as much as possible,"  a dealer at a state-owned bank said. 

Oil prices surged Wednesday due to tensions in West Asia and a reversal of supply cuts by the Organization of the Petroleum Exporting Countries and its allies. CBS News reported, quoting multiple sources, that US officials have been told Israel was completely prepared to initiate an operation in Iran. The US expects Iran may respond by targeting specific American locations in nearby Iraq. Trump said US personnel were being moved out of West Asia because "it could be a dangerous place" and added that the US would not allow Iran to have a nuclear weapon. 

Dealers said some banks bought dollars for Indian corporates, which also weighed on the Indian unit. Some foreign banks bought dollars for outflows from Indian equities. This too weighed on the rupee.  

Traders now await the release of the May personal consumption expenditure index, the Fed's preferred inflation gauge, due later in the day. Market participants also await the domestic May CPI inflation data, due later in the day, for further cues on the Reserve Bank of India's rate-cut cycle. CPI inflation is seen at a six-year low of 3.0% in May, as per an Informist poll of 12 economists.

The rupee was supported by a fall in the dollar index globally, dealers said. The dollar weakened as The Wall Street Journal reported, citing sources, that China was imposing a six-month restriction on its rare-earth export licences for US automakers and manufacturers, providing Beijing with leverage, should trade tensions escalate once more, while increasing uncertainty for American industry. The dollar index also declined after reports showed that US CPI for May was below market forecasts, raising expectations of a rate cut by the Federal Reserve in September.

During the day, the rupee is seen moving in a range of 85.40 and 85.60 against the dollar. Dealers peg key technical resistance for the Indian unit at 85.40 per dollar. (Kabir Sharma)

India Rupee: Fwd premium rises as US yields fall after lower-than-view CPI

MUMBAI – The one-year dollar/rupee forward premium rose slightly as US Treasury yields declined Wednesday after a lower-than-expected rise in inflation in May led to expectation of a rate cut by the Federal Reserve as early as September, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

"Forwards are mostly tracking US data right now. The IRD (interest rate differential) is dictating moves for the premiums right now," a dealer at a foreign bank said. "But there is still some uncertainty on the overall view on forwards, considering there is still lack of enough clarity on what will happen to US rates."

Data showed the US consumer price index increased 0.1% last month after rising 0.2% in April. Economists polled by Reuters had forecast the CPI climbing 0.2%. The yield on the benchmark US 10-year Treasury note fell 6 basis points to 4.41% on Wednesday. 

Traders now await the release of the May personal consumption expenditure index, the Fed's preferred inflation gauge, due later in the day. Market participants also await the May CPI inflation data, due later in the day, for further cues on the Reserve Bank of India's rate cut cycle. May CPI inflation is seen at a six-year low of 3.0%, as per an Informist poll of 12 economists. 

Meanwhile, some banks bought dollars for forward delivery on behalf of importers, noting the broadly lower forward levels, which also supported the forward premiums, dealers said. The one-year dollar/rupee forward premium has declined over 10 bps so far in June, and hit a near eleven month low of 1.77% on Monday.

At 1250 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 159.00 paise, against 158.00 paise at Wednesday's close. On an annualised basis, the premium was at 1.86%, against the previous close of 1.84%. (Pratiksha)

India Rupee: Technical levels for rupee - Jun 12

MUMBAI – At 1123 IST, the rupee was at 85.5225 per dollar. At 0900 IST, the rupee was at 85.4275 a dollar, against the previous close of 85.5100. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi and Pratiksha)

India Rupee:Tad higher as soft CPI, US-China trade deal details weigh on dlr

MUMBAI – The rupee was a tad higher against the dollar in early trade Thursday as the dollar weakened on the back of soft US CPI data and rising tensions in West Asia, dealers said. The dollar was also weighed down by China's six-month limit on rare earth export licences for US companies despite the two major economies agreeing on a trade deal, dealers said. 

"There are multiple factors pulling the dollar down. The inflation was lower and the trade talks also had some technicalities to be dealt with. We cannot see it as a thumping victory for US," a dealer at a State-owned bank said. 

The dollar fell as The Wall Street Journal reported, citing sources, that China was imposing a six-month restriction on rare earth export licences for US automakers and manufacturers, providing Beijing with leverage, should trade tensions escalate once more, while increasing uncertainty for American industry. While Beijing's decision to temporarily reinstate rare earth licences marked a significant breakthrough in the recent trade negotiations in London, the six-month timeframe highlighted how both parties maintain the means to quickly heighten tensions once more.

The dollar also declined after reports showed US CPI for May was below market forecasts, raising expectations of a rate cut by the Federal Reserve in September. US consumer prices increased slightly by 0.1% in May, as lower gasoline costs partially balanced out higher rental rates. Analysts in a Dow Jones survey had predicted a 0.2% increase in CPI. Nonetheless, inflation is anticipated to rise in the coming months because of the enforcement of Trump's reciprocal tariffs. Core CPI increased 0.1% compared to the previous month and 2.8% compared to the same month last year. 

"Trump is asking to cut rates and the Fed (Federal Reserve) wants to hold. That is also weighing on the dollar, plus Lagarde (European Central Bank President Christine Lagarde) being hawkish also does not bode well for it," a dealer at a foreign bank said. 

At 0936 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 98.43, slightly lower than its previous close of 98.58 and 99.05 Tuesday.

A surge in crude oil prices may limit gains for the Indian unit, dealers said. Prices rose due to tensions in West Asia and reversal of supply cuts by the Organization of the Petroleum Exporting Countries and its allies. This may prompt importers to stock up the commodity due to fear of further increase in prices. A rise in crude oil prices puts pressure on India's import bill, weighing on the Indian currency as well, dealers said. 

At 0936 IST, the August Brent Crude contract on the Intercontinental Exchange was at $69.43 per barrel, against $69.77 per barrel Wednesday, and sharply higher than $66.87 per barrel Tuesday.

During the day, the rupee is seen moving in a range of 85.40 and 85.60 against the dollar. Dealers peg key technical resistance for the Indian unit at 85.40 per dollar. (Kabir Sharma)

India Rupee: Expected range for rupee - Jun 12

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

(Gowri Lakshmi and Kabir Sharma)

India Rupee - Asia FX:Most up on US-China trade deal, lower-than-view US CPI

MUMBAI – Most Asian currencies rose against the dollar as sentiment improved after the US and China reached an agreement on lower tariffs. Investors assessed a US-China trade deal that includes China removing its restrictions on rare earth mineral exports and the US bringing its reciprocal tariff on China to 55% from 145%. 

"We made a great deal with China. We're very happy with it," US President Donald Trump said. "We have everything we need, and we're going to do very well with it. And hopefully, they are too." The final deal, however, is subject to an approval by Trump and Chinese President Xi Jinping. On Wednesday, Trump said he was willing to extend a Jul. 8 deadline to complete trade negotiations with other countries before US reciprocal tariffs come into effect, but said he did not believe this would be necessary. The offshore Chinese yuan traded flat against the greenback in early trade Thursday. 

The rise in Asian currencies was also because the dollar fell after data showed the US CPI for May was lower than market expectations, leading to hope of a rate cut by the Federal Reserve at its September meeting. US consumer prices rose less than expected in May, increasing marginally by 0.1%, as cheaper gasoline partially offset higher rents. Analysts in a Dow Jones poll had forecast a 0.2% CPI rise. However, inflation is expected to accelerate in the coming months due to Trump's reciprocal tariffs being implemented. Core CPI rose 0.1% on month and 2.8% on year.

At 0837 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 98.43, slightly lower than its previous close of 98.58 and 99.05 Tuesday.

The Thai baht led the gains and was up 0.5% against the dollar. The opposition People's Party warned that Thailand was coming perilously close to hitting its public debt ceiling, which it believes could jeopardise treasury reserves, the Bangkok Post reported. As public debt is expected to reach 13.5 trillion baht in the coming fiscal year, the proportion of debt to GDP is estimated to reach 69%, People's Party MP Sirikanya Tansakun said at a meeting of the House committee vetting the fiscal 2026 budget bill on Wednesday.

The Malaysian ringgit rose 0.1% against the greenback. Approved investments in Malaysia rose 3.7% in Jan-Mar from a year earlier to 89.8 billion ringgit ($21.2 billion), the Malaysian Investment Development Authority said on Wednesday. The top three sources of foreign investment in the quarter were Singapore at 28.3 billion ringgit, the US at 9.9 billion ringgit, and China at 7.9 billion ringgit.

The South Korean won rose 0.4% against the dollar. South Korea's main stock index, the Korea Composite Stock Price Index or KOSPI, surged to a more than three-year high on Wednesday, driven by gains in technology and auto stocks, as well as continued foreign investor interest, according to Yonhap News. The index closed at 2,907.04 points, its highest level since Jan. 14, 2022.

The Taiwan dollar was up 0.5% against the greenback, while the Indonesian rupiah was up 0.1%. The Australain dollar was down 0.2% against the dollar. (Kabir Sharma)

End

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

Edited by Vandana Hingorani 

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