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Informist, Wednesday, Aug. 6, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended slightly higher against the dollar Wednesday as traders, especially foreign banks, trimmed their long dollar positions after the Monetary Policy Committee of the Reserve Bank of India held the repo rate steady at 5.50% and retained the neutral policy stance, dealers said. Exporters also sold the greenback in early trade, which supported the rupee, dealers said. 

After rising to a high of 87.6300, the Indian unit settled at 87.7325 against the greenback, tad up from its previous close of 87.8000 a dollar. The domestic currency moved in a relatively narrow range of just over 16 paise during the day. 

A steady but broadly weak dollar index also supported the rupee and other Asian currencies, dealers said. Asian currencies were mixed Wednesday, with the South Korean won being the worst hit and the Philippine peso the biggest gainer. 

The rupee opened higher at 87.7200 against the greenback. The rupee was trading at 87.83 a dollar in the offshore non-deliverable forwards market. Some dealers speculated that the RBI sold dollars in the offshore NDF market a few minutes before the domestic spot market opened to prevent the rupee from inching toward its record low of 87.9500 a dollar. 

"It was surprising to me how the rupee opened higher. I expected it to open near 87 (87.87 a dollar), likely the RBI intervened in NDF," a currency trader at a brokerage firm said. "The MPC has matched the overall expectations, but some were expecting a 25 bps (basis points) cut. The tone is not explicitly hawkish, but he (RBI Governor Sanjay Malhotra) stressed more on the geopolitical issues and inflation."

After the domestic spot market opened, the rupee was supported by dollar sales by exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, dealers said. A few dealers also said that likely foreign-fund inflows into domestic equity relating to the MSCI reorganisation also supported the rupee. "I think flows are there, the MSCI inflows are likely to bring around $600 million," a dealer at a private-sector bank said.

After the monetary policy outcome, the rupee rose further and hit a high of 87.6300 a dollar as a few traders trimmed their long dollar positions. "Some were expecting a cut, possibly, but with ample liquidity, a cut was not a need of the hour. Maybe we can expect a cut in the next meeting, hopefully by then the geopolitical tensions would have also cooled and markets would have also settled," the currency trader at the brokerage said. 

A broadly steady but weak dollar index also supported the rupee, dealers said. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.64, against 98.96 Tuesday and 98.73 Monday. The dollar was weighed as investors assessed the state of the US economy after data published Tuesday showed a contraction in the services sector. 

The Institute of Supply Management's non-manufacturing purchasing managers' index fell to 50.1 in July from 50.8 the month prior. Analysts had expected the index to rise to 51.5.

However, the rupee erased some of its gains as banks purchased dollars likely for foreign portfolio investors, who withdrew funds from the domestic stock market, dealers said. On Wednesday, the benchmark stock indices, the Nifty 50 and the BSE Sensex, ended down 0.3% and 0.2%, respectively. Banks also purchased dollars for importers, who wanted to take advantage of the relatively lower dollar/rupee levels, dealers said. However, dollar purchases by importers were "passive" in nature, dealers said. 

FORWARDS

The one-year dollar/rupee forward rose Wednesday after the Reserve Bank of India's Monetary Policy Committee held the repo rate steady at 5.50%, dealers said. "Premiums started rising only after the MPC outcome," a dealer at a private-sector bank said. Exporters also sold dollars for forward delivery, to take advantage of the lucrative premium levels, dealers said.

With the US Federal Reserve likely to go for a rate cut in September, and with the RBI keeping rates unchanged on Wednesday, the interest rate differential between the US and India may widen further, dealers said. Forwards of a currency pair are reflective of the interest rate differential between two countries. The US Fed held the Federal Fund rates target range steady at 4.25-4.50% last week for the fifth consecutive meeting.

The rate-setting panel of the RBI Wednesday unanimously decided to keep the repo rate unchanged at 5.50%. The six-member committee also retained the "neutral" policy stance. So far in 2025, the committee has lowered the repo rate by 100 basis points. Dealers said a few of the market participants expected the committee to lower the repo rate by 25 bps.

The 10-year US Treasury yield remained unchanged Tuesday as investors weighed the state of the US economy after data showed a contraction in the services sector. The yield on the 10-year US Treasury note ended at 4.22% Tuesday, unchanged from Monday.

On Wednesday, the one-year dollar/rupee premium ended at 2.03%, up from 2.02% Tuesday but down from 2.04% Monday. On an absolute basis, the premium was 179.15 paise, up from 177.70 paise Tuesday and 178.88 Monday. 

OUTLOOK

On Thursday, the rupee will take cues from the movement of the dollar index and offshore Chinese yuan, dealers said. The rupee will also take cues from the movement of crude oil prices, dealers said. "I think till next week the rupee should trade in a range of 87.50-88.00 a dollar. Once 88 is hit, the RBI will heavily guard it, no doubt," the currency dealer at the brokerage said. 

The rupee is likely to be supported by dollar sales by exporters, who are wary of an appreciation of the domestic currency and want to take advantage of the relatively higher dollar/rupee levels, dealers said. Should the rupee rise past 87.50, importers are likely to purchase dollars to take advantage of the lucrative dollar/rupee levels, dealers said. However, dealers expect foreign fund outflows to continue to weigh on the rupee. 

Dealers also expect the RBI to step in with dollar sales if the rupee comes under pressure and inches toward the psychologically crucial level of 88 a dollar. Market participants will also closely watch for any tariff-related news from the US. 

During the day, the rupee is expected to move in a range of 87.50-87.90 against the greenback. Dealers peg the key technical resistance for the domestic currency at 87.50 a dollar. 

India Rupee - World FX: Euro rises as bloc's retail sales beat estimates

MUMBAI – The euro was up 0.2% against the dollar after retail sales in the Eurozone rose more than the market expected. The Eurozone's retail sales increased 3.1% year-on-year in June, following a revised 1.9% growth in May, according to official data released by Eurostat on Wednesday. The market consensus was for a 2.6% rise. On a monthly basis, retail sales in Europe rose 0.3% in the same period versus May's (-)0.3% revision while missing market expectations of 0.4% rise.

Owing to the rise in the euro, the dollar index eased slightly from its earlier highs. At 1541 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 98.73, against 98.76 Tuesday and 98.73 Monday.

The greenback was supported by a fall in the Japanese yen after weak economic data from the region. Wage growth in Japan rose less than expected in June. Nominal cash earnings printed at 2.5% on year against the estimates of 3.1% reflecting the outcome of this year's annual spring labor-management wage negotiations. The less volatile scheduled pay growth for full-time workers unexpectedly slowed to 2.3% on year, lower than the consensus of 2.5%. 

The pound sterling was broadly flat against its major peers as market participants were focused on the Bank of England's monetary policy announcement on Thursday. Investors expect the central bank to cut interest rates by 25 basis points to 4%. If it does so, it would be the fifth interest rate cut by the UK central bank in its monetary expansion cycle, which started in August 2024. (Kabir Sharma)

India Rupee: Fwd premiums up after MPC holds rates steady, stance neutral

MUMBAI – The one-year dollar/rupee forward rose Wednesday after the Reserve Bank of India's Monetary Policy Committee held the repo rate steady at 5.50% against expectations of a cut, dealers said. "Premiums started rising only after MPC outcome," a dealer at a private-sector bank said. Exporters also sold dollars for forward delivery, to take advantage of the lucrative premium levels, dealers said.

With the US Federal Reserve likely to go for a rate cut in September, and with the RBI keeping rates unchanged on Wednesday, the interest rate differential between the US and India may widen further, dealers said. Forwards of a currency pair are reflective of the interest rate differential between two countries. The US Fed held the Federal Fund rates target range steady at 4.25-4.50% last week for the fifth consecutive meeting.

The rate-setting panel of the RBI maintained status quo and kept the repo rate at 5.50% in a unanimous decision Wednesday. The six-member committee also retained the "neutral" policy stance. So far in 2025, the committee has lowered the repo rate by 100 basis points. Dealers said a few of the market participants expected the committee to lower the repo-rate by 25 bps.

The 10-year US Treasury yield remained unchanged Tuesday as investors weighed the state of the US economy after data showed a contraction in the services sector. The Institute for Supply Management's non-manufacturing purchasing managers' index slipped to 50.1 in July from 50.8 the prior month. This was against analysts' forecast of a rise to 51.5 in a Reuters poll. The yield on the 10-year US Treasury note ended at 4.22% Tuesday, unchanged from Monday.

At 1450 IST the one-year dollar/rupee premium was 2.04%, up from 2.02% Tuesday but flat from 2.04% Monday. On an absolute basis, the premium was 179.65 paise, up from 177.70 paise Tuesday and 178.88 Monday.  (Gowri Lakshmi)

India Rupee: Sharply up as traders cut long dlr bets; MPC keeps rates steady

MUMBAI – The rupee rose sharply against the dollar Wednesday as traders, especially from foreign banks, trimmed their long dollar positions, dealers said. The Reserve Bank of India's Monetary Policy Committee held the repo rate steady at 5.50% and maintained the neutral stance at its August meeting.

"I think a part of market was expecting a 25 bps (basis points) cut from RBI and but they (RBI) signalled a more hawkish tone than an expected dovish tone," a dealer at a private sector bank said. "So RBI holding the policy rate and policy stance turned positive for the INR (rupee) and all the foreign banks who were long (long dollar bets) since last one week have started unwinding." 

RBI's rate-setting panel held the repo rate steady at 5.50% in a unanimous decision, RBI Governor Sanjay Malhotra said Wednesday. All six members of the MPC also retained the "neutral" policy stance. The RBI began easing its monetary policy in February with a 25 bps cut, followed by another 25 bps in April and a jumbo cut of 50 bps in June. So far in 2025, the committee has lowered the repo rate by 100 bps. 

The committee maintained status quo citing excessive volatility in the global environment and lingering risks to growth. US President Donald Trump has threatened substantially raising tariffs on India from the 25% already announced. 

"88 (a dollar) is clear. Trump's statements are creating volatility, and I believe RBI doesn't want rupee to move due to that. Unless the dollar strengthens significantly and sustains above the 100 level, the RBI is most likely to support the rupee through intervention," the dealer at the private-sector bank said. Some dealers speculate that the RBI sold dollars in the offshore non-deliverable forwards market before the domestic markets opened, to prevent the rupee from inching toward its lifetime low of 87.9500 a dollar.

The dollar index remained broadly unchanged. Data published on Tuesday showed the US composite purchasing managers' index rose to 55.1 in July, beating the preliminary estimate of 54.6 in and 52.9 in June. However, the greenback was weighed as the non-manufacturing purchasing managers' index fell to 50.1 in July from 50.8 in June. Economists surveyed by Reuters had forecast that the services PMI would increase to 51.5. At 1326 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 98.74, against 98.76 Tuesday and 98.73 Monday.

For the rest of the day, the rupee is seen moving in a range of 87.55-87.70 against the greenback. Dealers peg key technical resistance for the rupee at 87.55 a dollar.  (Gowri Lakshmi)

India Rupee: Technical levels for rupee - Aug 6

MUMBAI – At 1211 IST, the rupee was at 87.7000 per dollar. At 0900 IST, the rupee was at 87.7200 a dollar, against the previous close of 87.8000. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Kabir Sharma and Gowri Lakshmi)

India Rupee: Tad up on dlr sales by exporters; likely RBI dlr sales also aid

MUMBAI – The rupee was slightly up against the dollar Wednesday as banks sold dollars on behalf of exporters and for some inflows into domestic equities, dealers said. Some dealers said the Reserve Bank of India also likely sold dollars to prevent the rupee from falling to a record low. Market participants keenly await the outcome of the RBI's Monetary Policy Committee meeting at 1000 IST.

The rupee was at 87.83 per dollar in the offshore market. "There seemed to be some intervention in offshore, which carried over in the spot market as well," a dealer at a state-owned bank said. 

Fourteen of the 17 economists polled by Informist said they expect the MPC to leave the repo rate unchanged at 5.50%. Three poll participants said a rate cut remains a possibility after retail inflation fell to an over-six-year low of 2.10% in June and averaged 2.7% in Apr-Jun, 20 bps lower than the central bank's projections.

The rupee was also supported by a slight fall in the dollar index, dealers said. The dollar index erased gains as the US Institute for Supply Management's non-manufacturing purchasing managers' index fell to 50.1 last month from 50.8 in June. Economists polled by Reuters had forecast that the services PMI would increase to 51.5.

At 0937 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.72, against 98.76 Tuesday and 98.73 Monday.

Dealers said the threat of tariffs from the US loom large for the rupee with President Donald Trump on Tuesday saying he may "substantially" raise the 25% tariffs on Indian goods announced earlier. During the day, the rupee is seen moving in a range of 87.50 to 88.00 against the dollar. Dealers peg key technical support for the rupee at 88.00 a dollar. (Kabir Sharma)

India Rupee - Asia FX: Most down as dlr firm; South Korean won biggest loser

MUMBAI – Most Asian currencies were down against the dollar on Wednesday as the greenback remained firm on stronger than expected US manufacturing data. The S&P Global US Composite PMI rose to 55.1 in July, surpassing both the preliminary estimate of 54.6 and June's reading of 52.9, data released Tuesday showed.

The dollar was also supported by US President Donald Trump's tariff threats to multiple Asian countries. At 0845 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.80, against 98.76 Tuesday and 98.73 Monday.

The South Korean won suffered the most because of fall in local equities. The currency was down 0.3% against the dollar. Chipmaker Samsung Electronics fell 2.00% and peer SK Hynix was down 1.90% after the Philadelphia Semiconductor Index declined 1.12% overnight. Drugmaker Samsung BioLogics slipped 2.09% and peer Celltrion shed 0.56%. Unresolved tensions in the recent trade agreement continue to pose potential disputes as South Korea and the US prepare for a summit between President Donald Trump and President Lee Jae-myung.

The offshore Chinese yuan was down 0.1% against the dollar despite upbeat domestic economic data, as markets remained watchful of trade tensions. China's services activity expanded at its fastest pace in 14 months in July fuelled by stronger demand, including a rise in new export orders.

The Taiwan dollar and the Malaysian ringgit were down 0.1% each against the dollar.

Bucking the trend, the Indonesian rupiah was up 0.1% against the dollar after the government declared a hefty stimulus. The Indonesian government will launch a 10.8-trillion-rupiah stimulus package in the third quarter to accelerate economic expansion, Finance Minister Sri Mulyani Indrawati announced on Tuesday. (Kabir Sharma)

India Rupee: Expected range for rupee - Aug 6

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

(Pratiksha and Kabir Sharma)

End

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

Edited by Saji George Titus

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