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Informist, Thursday, Aug. 7, 2025

By Pratiksha

MUMBAI - The rupee settled largely steady against the dollar on Thursday as the drag from persistent foreign portfolio outflows was countered by the Reserve Bank of India's intervention through dollar sales, dealers said. The Indian currency also came out unscathed from the impact of US President Donald Trump's latest tariff imposition on India as market participants had broadly factored in such a move, they said. 

"There was minimal to no impact (on the rupee) from the tariff news but then outflows were of course there," a dealer at a foreign bank said. "RBI came in to keep the volatility in check."

After moving in a range of 10 paise during the day, the rupee ended at 87.7025 a dollar, against 87.7325 a dollar on Wednesday. However, other Asian currencies gained 0.1-0.8% against the dollar, with the Philippine peso being the best performer. The rupee was the second worst performer in the emerging market pack. 

The Indian unit began the day largely steady against the dollar even after Wednesday's news of Trump imposing an additional 25% tariff on Indian goods being shipped to the US for maintaining a trade relationship with Russia, especially for procuring Russian crude oil. On Jul. 30, Trump had announced a 25% tariff on Indian goods shipped to the US, along with an unspecified penalty for procurement of military equipment and energy from Russia. The 25% tariff is set to kick in Thursday and the additional 25% tariff will be collected from Aug. 27.

Dealers said the latest action by Trump was broadly in line with market expectations and factored in, which is what reflected in the rupee levels. "Nobody reacted overly to the tariff news. People had looked at all the worst possibilites after the first announcement had a penalty attached to it," a dealer at a state-owned bank said. 

However, risk aversion among investors owing to escalating tensions between the US and India resulted in foreign portfolio outflows, mostly from Indian equities, which weighed on the Indian unit, dealers said. The rupee fell to a low of 87.7625 a dollar during the day. After pulling out $2.85 billion from domestic equities last month, FPIs have withdrawn $212.5 million from equities so far this month. 

However, some state-owned and private-sector banks stepped in to sell dollars, likely on behalf of the RBI, which supported the rupee, dealers said. "It seems like the RBI does not want rupee to hit 88 due to Trump related news. It wants rupee to only react to fundamentals," a dealer at a state-owned bank. The central bank has been active in both the offshore non-deliverable forwards and domestic spot market to support the rupee this week, in the face of US tariff pressure.

After the rupee shrugged off the impact of Trump's latest tariff announcement, some banks also sold the greenback on behalf of exporters, who had earlier expected the rupee to fall sharply on the back of any negative news on the tariff front. This also supported the Indian unit. 

Meanwhile, the dollar index weakened further during European trade on growing expectation of a rate cut by the US Federal Reserve in September following the recent set of soft economic data. Fed funds futures traders are now pricing in a 93% probability of a 25-basis-point cut at the Fed's September meeting, up from 48% a week ago, according to the CME Group's FedWatch tool. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.12, against 98.19 Wednesday and 98.76 Tuesday. The index touched a low of 97.95 during the day. 

FORWARDS

The one-year dollar/rupee forward premium ended higher on growing expectations of a rate cut by the US Federal Reserve in September after recent set of soft economic data in the world's largest economy, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

With the Fed likely to go for a rate cut in September and slim chances of a rate cut by the Reserve Bank of India for the rest of the year after its Monetary Policy Committee stood pat on rates at 5.50% Wednesday, the interest rate differential between the US and India may widen further, supporting the premiums. 

Meanwhile, some banks sold the greenback for forward delivery, noting the relatively higher levels, which capped the rise in premiums, according to dealers. Premium rose to a high of 2.08% earlier in the day. Market participants see strong support for the one-year dollar/rupee forward premium at 2.10%. 

At 1530 IST, the one-year exact period dollar/rupee premium was 2.06%, against 2.03% Wednesday. On an absolute basis, the premium was at 180.71 paise, against Wednesday's 179.15 paise.

OUTLOOK

On Friday, the rupee will take cues from any further development on the US tariff front and movement in the dollar index, dealers said. Market participants also await the outcome of the Bank of England's policy decision, due at 1630 IST. The UK central bank is widely expected to cut interest rates by 25 bps to 4.00%. Investors will watch out for the voting pattern of the rate decision and look for cues on the future rate path.

The local unit may continue to be weighed down by dollar purchases on behalf of FPIs, looking to withdraw funds from the Indian markets, as risk aversion looms large among investors, dealers said. However, they expect the central bank to intervene in the domestic spot market and offshore non-deliverable forwards market through dollar sales to prevent the local unit from falling beyond the psychologically crucial 88-per-dollar mark.

"In the near term, dollar/rupee will be influenced by FPI flows, RBI interventions, and the broader trend of the US dollar overseas," Anindya Banerjee, head currency and commodity research at Kotak Securities, said in a note. "We anticipate dollar/rupee to trade within a range of 87.40 to 88.30. A weakening US dollar index may provide some cushion to the Indian rupee."

During the day, the rupee is expected to move in a range of 87.50 to 87.90 a dollar. Dealers peg key technical support for the rupee at 88.00 a dollar.

India Rupee - World FX: Dlr index down; pound sterling up before BoE outcome

MUMBAI – The dollar index weakened further during European trade on growing expectation of a rate cut by the US Federal Reserve in September following the recent set of soft economic data in the world's largest economy. Fed funds futures traders are now pricing in a 94% probability of a 25-basis-point cut at the Fed's September meeting, up from 48% a week ago, according to the CME Group's FedWatch tool. At 1505 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.10, against 98.19 Wednesday and 98.76 Tuesday.

Further, the pound sterling rose 0.1% against the dollar ahead of the outcome of the Bank of England's policy decision, due later in the day. The central bank is widely expected to cut interest rates by 25 bps to 4.00%. This will mark the fifth rate cut by the BoE in 12 months. Market participants will watch out for the voting pattern of the rate decision and look for cues on the future rate path.

The euro rose 0.2% against the greenback on growing hopes of a ceasefire in Ukraine. Ukrainian President Volodymyr Zelenskiy said he planned contact with Germany, France, and Italy Thursday to discuss moving towards peace. Reports of a meeting between US President Donald Trump and Russia's President Vladimir Putin over the war in Ukraine also boosted investor sentiment.

Both the Australian dollar and the New Zealand dollar rose 0.4% against the dollar, tracking weakness in the dollar index.  (Pratiksha) 

India Rupee: 1-year forward premium rises on expectation of US Fed rate cut

MUMBAI – The one-year dollar/rupee forward premium rose on growing expectations of a rate cut by the US Federal Reserve in September after recent set of soft economic data in the world's largest economy, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries. "The US rate cut view is getting strong. After yesterday's (Wednesday's) MPC (Monetary Policy Committee), it is unsure when they will cut now," a dealer at a foreign bank said. 

Fed funds futures traders are now pricing in a 94% probability of a 25-basis-point cut at the Fed's September meeting, up from 48% a week ago, according to the CME Group's FedWatch Tool. With the Fed likely to go for a rate cut in September and slim chances of a rate cut by the Reserve Bank of India for the rest of the year after its Monetary Policy Committee stood pat on rates at 5.50% Wednesday, the interest rate differential between the US and India may widen further, dealers said. 

Meanwhile, some banks sold the greenback for forward delivery, noting the relatively higher levels, which capped the rise in premiums, according to dealers. Premium rose to a high of 2.07% earlier in the day. Market participants see strong support for the one-year dollar/rupee forward premium at 2.10%. 

At 1350 IST, the one-year exact period dollar/rupee premium was 2.06%, against 2.03% Wednesday. On an absolute basis, the premium was at 180.71 paise, against Wednesday's 179.15 paise.  (Pratiksha)

India Rupee: Stays steady as FPI outflows offset exporters' dollar sales

MUMBAI – The rupee remained steady against the dollar as foreign fund outflows offset the impact of dollar sales by exporters, dealers said. The rupee also traded in a relatively narrow range of 8 paise so far during the day due to lower-than-usual trade volume, dealers said. "Rupee is very range bound yesterday (Wednesday) and today (Thursday) and market did not respond to the tariff threats because they had factored in and moreover, they know the RBI (Reserve Bank of India) will hold fort for rupee," a currency trader at a broking firm said.

Despite rising tensions between India and the US, the rupee did not inch towards the psychologically-crucial 88.00-per-dollar mark, largely because market participants had factored in an aggressive tariff announcement from US President Donald Trump. Noting that the rupee did not fall against the dollar despite the latest tariff announcement, some exporters sold the greenback around 87.76 levels, to take advantage of the relatively higher dollar/rupee levels, dealers said. Dollar sales by exporters had pushed the rupee to the day's high of 87.6675.

"If market reacted to the tariffs, it should have gone to 88 (a dollar) easily but since it did not go as expected, exporters started selling at even the current levels," the currency trader at the broking firm said. 

However, the rupee came under pressure as banks purchased the greenback on behalf of foreign portfolio investors, who continue to withdraw funds from domestic financial markets, especially the stock market, dealers said. At 1311 IST, the benchmark Nifty 50 and the BSE Sensex were down 0.7%, each. Dealers expect the rupee to remain under pressure due to foreign fund outflows amid heightened geopolitical tensions and uncertainties over US tariff policy.

For the rest of the day, the rupee is expected to move in a range of 87.60 and 87.80 against the greenback. Dealers peg key technical resistance for the rupee at 87.60 against the dollar.  (Gowri Lakshmi)

India Rupee: Technical levels for rupee - Aug 7

MUMBAI – At 1050 IST, the rupee was at 87.7000 per dollar. At 0900 IST, the rupee was at 87.6800 a dollar, against the previous close of 87.7325. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)

India Rupee: Steady as latest US tariffs on India in line with expectations

MUMBAI – The rupee was largely steady against the dollar as US President Donald Trump's latest tariff imposition on India is broadly in line with market expectations and factored in, dealers said. "The market has been taking into account Trump's regular threats to India. So, this was not surprising at all," a dealer at a state-owned bank said. "Also, at this point people know RBI will protect (the rupee), so that helped as well."

Trump Wednesday imposed an additional 25% tariff on Indian goods being shipped to the US for its trade relations with Russia, especially for procuring crude oil. On Jul. 30, Trump had announced a 25% tariff on Indian goods shipped to the US, along with an unspecified penalty for procurement of military equipment and energy from Russia. The 25% tariff is set to kick in Thursday and, according to the White House order, the additional 25% tariff will be collected from Aug. 27.

Further, the dollar index fell sharply on Wednesday because of growing expectations of a rate cut by the US Federal Reserve after recent set of soft economic data, supporting the Indian currency. Fed funds futures traders are now pricing in a 94% probability of a 25 basis point cut at the Fed's September meeting, up from 48% a week ago, according to the CME Group's FedWatch Tool. At 0925 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.25, against 98.19 Wednesday and 98.76 Tuesday.

Rise in other Asian currencies also supported the Indian currency, according to dealers. Asian units rose 0.1-0.5% against the dollar, with the Taiwan dollar gaining the most amongst its peers. 

However, dealers expect foreign portfolio outflows from the Indian market to continue, owing to risk aversion among investors, which would weigh on the Indian currency during the day. "Outflows will continue. No doubt about that," a dealer at a private-sector bank said. "But I think 88 (a dollar) and even the record low for that matter will be protected." The rupee had fallen to a record low of 87.9500 a dollar on Feb. 10.

During the day, the rupee is seen moving in a range of 87.60 to 87.90 against the dollar. Dealers peg key technical support for the rupee at 88.00 a dollar.  (Pratiksha)

India Rupee - Asia FX: Most up on weak dollar index; Philippine peso up 0.4%

MUMBAI – Most Asian currencies rose against the dollar as the dollar index fell on Wednesday on growing expectation of the US Federal Reserve cutting interest rates in September after the recent set of soft economic data in the world's largest economy.

Fed funds futures traders are now pricing in a 94% probability of a 25-basis-point cut at the Fed's September meeting, up from 48% a week ago, according to the CME Group's FedWatch Tool. At 0855 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 98.27, against 98.19 Wednesday and 98.76 Tuesday.

Both the Taiwan dollar and the Philippine peso gained 0.4% against the dollar, the most among their peers. Data showed on Thursday that the Philippine economy grew by 5.5% in Apr-Jun from a year earlier, compared to the previous quarter's 5.4% expansion. Economists in a Reuters poll had expected growth of 5.4%.

The Indonesian rupiah was up 0.3%. Several Indonesian economic think tanks called on Wednesday for a more detailed explanation of the government's GDP data, questioning the official release which showed growth in Apr-Jun was at its fastest in two years, reports said.

The South Korean won rose 0.1% against the greenback after the country reported a record-high current account surplus in June on strong demand for technology exports, data showed on Thursday. The country's current account stood at a surplus of $14.27 billion, up from $10.14 billion in May. 

Bucking the trend, the Chinese yuan was flat against the dollar even after US President Donald Trump said on Wednesday he could announce further tariffs on China, similar to the 25% duties announced on India over its purchases of Russian oil, depending on what happens. Trump on Wednesday slapped an additional 25% tariff on Indian goods, on top of a 25% tariff announced previously, citing its continued purchases of Russian oil.  (Pratiksha) 

India Rupee: Expected range for rupee - Aug 7

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: 

(Pratiksha)

End

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

Edited by Vandana Hingorani

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