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Informist, Tuesday, Aug. 12, 2025

By Pratiksha

NEW DELHI – The rupee ended slightly lower against the dollar amid lacklustre volume as banks bought the greenback on behalf of oil marketing companies and other importers, dealers said. However, traders turned their attention to the crucial US inflation data, due later in the day, and avoided placing large bets, they said.  

"There was hardly any significiant movement in the rupee. It kept trading in a 4-5 paise range for most of the day. US CPI will be the next big trigger (for rupee)," a dealer at a state-owned bank said.

After trading in a range of 14 paise during the day, the Indian currency settled at 87.7125 a dollar on Tuesday, against 87.6600 on Monday. Asian currencies traded on a mixed note ahead of the US inflation data, with the Taiwan dollar falling 0.3% against the dollar while the South Korean won rose 0.2%. 

A sense of caution prevailed in the market right from the beginning as the rupee started the day broadly steady against the greenback. A cooling inflation would cement expectations of a rate cut in the US next month. However, if evidence of US President Donald Trump's tariffs fuelling price rises surface, investors may start betting on the US Federal Reserve holding rates for now. 

The US CPI for July is expected to have risen 2.8% on an annual basis, according to a Reuters poll, against 2.7% rise in June. The month-on-month core US CPI is seen edging up 0.3% in July, faster than the 0.2% in the previous month.

"The thing is there is a bit of uncertainty on the CPI number. If the CPI print comes in really good, I expect rupee to go below even 87.00 in the near term," a dealer at a private-sector bank said. 

The inflation print comes after a weaker-than-expected US jobs report has bolstered expectations of a rate cut by the Fed next month. Currently, Fed funds futures traders are pricing in an 85% probability of a 25-basis-point cut at the Fed's September meeting, according to the CME Group's FedWatch Tool.

Shortly after opening, the rupee rose to the day's high of 87.5900 a dollar as foreign banks sold dollars for foreign fund inflows, likely into an Indian corporate, dealers said. The foreign inflows were also likely on account of overseas investment into the initial public offering of BlueStone Jewellery and Lifestyle Ltd., some dealers said. The company's public offer opened Monday and will close Wednesday.

However, the Indian currency was weighed by dollar purchases on behalf of importers, particularly oil marketing companies, who wanted to take advantage of the relatively lower dollar/rupee levels, dealers said. "Importer demand (for dollars) is continuing at every dip (in dollar/rupee)," a dealer at a state-owned bank. "This negative bias for rupee will be there." Some importers also bought the greenback on fear that the local unit may depreciate further if the US CPI print comes in higher than expected. 

Meanwhile, the dollar index rose slightly ahead of the release of the US inflation data, weighing on the Indian unit, dealers said. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.59, against 98.50 Monday and 98.27 Friday. 

A fall in domestic equities also exerted downward pressure on the Indian currency, according to some dealers. On Tuesday, the Sensex and Nifty 50 ended 0.5% and 0.4% lower, respectively.

FORWARDS

The one-year dollar/rupee forward premium ended lower Tuesday as banks sold forward dollars on expectation that the US inflation for July may surprise on the higher side, dealers said. Data showing higher-than-expected inflation could undermine the growing expectation of interest rate cuts in the US. Forwards of a currency pair are reflective of the interest rate differential between two countries.

"Fed seems to be on track to cut rates. But if CPI jumps more, then we can see (one-year) forwards premium falling to around 2.04-2.05% levels," a dealer at a state-owned bank said.

However, some banks stepped in to buy dollars for forward delivery, noting the relatively lower levels, which limited the fall in premiums, dealers said. "Premiums have been slowly rising in the last few days. So some paying came after the small decline," a dealer at a private-sector bank said. So far this month, the one-year dollar/rupee forward premium has risen over 10 bps.

Market participants also awaited the release of India's inflation data for July, due at 1600 IST. Data released post market hours showed India's headline CPI inflation fell to 1.55% in July, the lowest print since June 2017. 

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 2.07%, against 2.09% Monday. On an absolute basis, the premium was 182.13 paise, against 182.84 paise Monday.

OUTLOOK

On Wednesday, the rupee will take cues from movement in the dollar index after the release of the US inflation data, dealers said. Most dealers expect the rupee to rise against the dollar if US inflation edges lower from June's print of 2.7%. However, they expect the rupee to fall sharply, likely inching closer to its record low of 87.9500 a dollar, if inflation in the world's largest economy rises above 3% in July. 

"I expect month-on-month small dip in the US inflation print, while year-on-year I am expecting it to remain unchanged," a dealer at a brokerage firm said. "I think with this, bets for rate cut may rise but rupee is still weak and expected to trade with weak bias even after that."

Further, the local unit will also track movement in crude oil prices and other emerging market currencies. Market participants will continue to keep a close eye on developments related to US tariffs. 

Dealers expect the Indian unit to be weighed down by foreign portfolio outflows as investors remain risk averse, dealers said. However, they expect the central bank to intervene in the domestic spot market and offshore non-deliverable forwards market through dollar sales, if the rupee is headed towards falling beyond the psychologically crucial 88-per-dollar mark.

During the day, the rupee is expected to move in a range of 87.40 to 87.90 a dollar. Dealers peg technical support for the rupee at 87.80 a dollar and resistance at 87.50.

India Rupee - World FX: Australian dollar falls after central bank cuts rate

NEW DELHI – The Australian dollar fell 0.3% against the dollar after the central bank cut interest rate by 25 bps on Tuesday, as widely expected, and signalled further policy easing. The Reserve Bank of Australia cut the main cash rate by 25 bps to 3.6%, slashing rates for the third time this year. 

Governor Michele Bullock said policymakers would decide moves on a meeting by meeting basis to ensure the bank met its two mandates of low and stable inflation and full employment. The New Zealand dollar was down 0.2% against the greenback, tracking a decline in the Australian dollar. 

The pound sterling was up 0.2% even after data released on Tuesday showed the UK jobs market has weakened, with the payrolls dropping for the sixth consecutive month and vacancies declining as well. The number of employees on company payrolls in the UK fell by a provisional 8,000 in July from June. The reduction in June was revised down to 26,000, fewer than the originally reported fall of 41,000. Basic wage growth in the private sector edged down to 4.8% in the three months to June.

The dollar index was broadly steady ahead of the release of the key US inflation data later in the day. Market participants await the key economic data for further cues on the impact of tariffs on inflation and the quantum of potential rate cuts by the US Federal Reserve this year. 

Economists polled by Reuters have forecast that the US core CPI will edge up 0.3% on month in July, faster than the 0.2% rise in the previous month. Currently, Fed funds futures traders are pricing in an 85% probability of a 25-basis-point cut at the Fed's September meeting, according to the CME Group's FedWatch Tool.

At 1440 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.51, against 98.50 Monday and 98.27 Friday. The euro was also steady against the US unit. (Pratiksha) 

India Rupee: Rises slightly on FX inflows; volume dull ahead of US CPI data

NEW DELHI – The rupee rose slightly against the dollar amid lower-than-usual volume as foreign banks sold dollars for foreign fund inflows, dealers said. However, dollar buys by some banks on behalf of oil marketing companies limited gains for the Indian unit, they said. 

The rupee rose to a high of 87.5925 a dollar earlier in the day on the back of foreign inflows. Oil importers bought the greenback to make the most of the relatively lower dollar/rupee levels, dealers said. "Importer demand (for dollars), especially from oilers (oil importers) is decent," a dealer at a private-sector bank said. "This should continue till the time there is no positive news on (US) tariffs."

However, volume in the currency market was lacklustre as traders refrained from placing large bets ahead of the release of the key US inflation data later in the day, dealers said. The inflation print comes after a softer-than-expected US jobs report has strengthened bets of a rate cut by the Federal Reserve next month. However, if signs of US President Donald Trump's tariffs fuelling price rises emerge, investors may start betting on the Fed holding rates for now.

"Market liquidity is very light before US CPI. We may see some directional move from tomorrow (Wednesday) once the numbers are out," a dealer at a state-owned bank said. Economists polled by Reuters have forecast that month-on-month core US CPI edged up 0.3% in July, faster than the 0.2% in the previous month. Currently, Fed funds futures traders are pricing in an 84% probability of a 25-basis-point cut at the Fed's September meeting, according to the CME Group's FedWatch Tool.

During the day, the rupee is seen moving in a range of 87.50 to 87.80 against the dollar. Dealers peg key technical resistance for the rupee at 87.50 a dollar and support at 87.80. (Pratiksha)

India Rupee: Fwd premium tad down on view US CPI may be higher-than-expected

NEW DELHI – The one-year dollar/rupee forward premium fell slightly Tuesday as banks sold forward dollars on expectation that the US inflation for July, due later in the day, may surprise on the higher side, dealers said. Data showing higher-than-expected inflation could undermine the growing expectation of interest rate cuts in the US. Forwards of a currency pair are reflective of the interest rate differential between two countries.

"I think the expectation is that US yields will spike after the inflation report," a dealer at a state-owned bank said. "That is why we saw some receiving in the morning. After that some paying came in."

Economists polled by Reuters have forecast that the US core CPI will edge up 0.3% on-month in July, faster than the 0.2% rise in the previous month. Expectations of a rate cut by the US Federal Reserve in September had grown after soft jobs data. Currently, Fed funds futures traders are pricing in an 85% probability of a 25-basis-point cut at the Fed's meeting in September, according to the CME Group's FedWatch Tool.

However, some banks stepped in to buy dollars for forward delivery, noting the relatively lower levels, which limited the fall in premiums, dealers said. "Premiums have been slowly rising in the last few days. So some paying came after the small decline," a dealer at a private-sector bank said. So far this month, the one-year dollar/rupee forward premium has risen over 10 bps.

Market participants also await the release of India's inflation data for July, due later in the day. However, they expect India inflation to come on expected lines. Retail inflation in India likely fell to a record low of 1.3% in July mainly because of the statistical effect of a high base and lower food prices, according to an Informist poll. 

Market participants see strong support for the one-year dollar/rupee forward premium at 2.10%. At 1255 IST, the one-year exact period dollar/rupee premium was 2.08%, against 2.09% Monday. On an absolute basis, the premium was 181.90 paise, against 182.84 paise Monday. (Pratiksha)

India Rupee: Technical levels for rupee - Aug 12

NEW DELHI – At 1049 IST, the rupee was at 87.6200 per dollar. At 0900 IST, the rupee was at 87.6950 a dollar, against the previous close of 87.6600. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)

India Rupee: Largely steady as traders cautious ahead of Jul US CPI data

NEW DELHI – The rupee was largely steady against the dollar Tuesday as traders exercised caution ahead of the release of the crucial US inflation data later in the day, dealers said. The key economic data will provide further cues on the impact of tariffs on inflation and the quantum of potential rate cuts by the Federal Reserve this year.

"The US inflation number is important since it will help decide where the dollar heads next. The dollar index has been in a range of sorts, which should break after this," a dealer at a private-sector bank said. 

Economists polled by Reuters have forecast that the US core CPI will edge up 0.3% on-month in July, faster than the 0.2% rise in the previous month. Currently, Fed funds futures traders are pricing in an 85% probability of a 25-basis-point cut at the Fed's September meeting, according to the CME Group's FedWatch Tool.

"There's strong support at 87.50-87.60 (a dollar). Also, the market is not falling because of US CPI today (Tuesday), otherwise there would have been active sell-off," a dealer at another private-sector bank said. At 0930 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.49, against 98.50 Monday and 98.27 Friday. 

However, dealers expect foreign portfolio outflows from the Indian markets owing to weak risk appetite among investors, which could weigh on the Indian currency during the day. So far in August, foreign portfolio investors have pulled out $1.02 billion from domestic equities. 

A rise in domestic and other Asian equities supported the Indian unit, some dealers said. At 0930 IST, both the Sensex and Nifty 50 were up 0.1%. 

During the day, the rupee is seen moving in a range of 87.50 to 87.90 against the dollar. Dealers peg key technical resistance for the rupee at 87.50 a dollar and support at 87.80. (Pratiksha)

India Rupee - Asia FX: Mixed before US CPI data; rise in local shrs support

NEW DELHI – Asian currencies traded mixed ahead of the release of the US inflation data, due later in the day. Market participants await the key economic data for more cues on the next rate cut by the US Federal Reserve. 

A cooling inflation would reinforce expectations of a rate cut in the US next month. However, if signs emerge showing US President Donald Trump's tariffs are fuelling a price rise, investors may start betting on the Fed holding rates for now.

Economists polled by Reuters have forecast that the US core CPI edged up 0.3% on-month in July, faster than the 0.2% in the previous month. Currently, Fed funds futures traders are pricing in an 85% probability of a 25-basis-point cut at the Fed's September meeting, according to the CME Group's FedWatch Tool.

A rise in most Asian equities after US President Donald Trump Monday extended China's trade deal deadline by another 90 days, supported the currencies. The extension prevents US tariffs on Chinese goods from shooting up to 145% and keeps the same at 30% for now, while leaving Chinese duties on US imports at 10%. However, the Chinese yuan was flat against the dollar. 

The Indonesian rupiah was down 0.1% against the greenback. However, losses in the currency were limited due to a sharp rise in equities. At 0830 IST, Indonesia's Jakarta Composite was up 1.3%. 

Both the South Korean won and the Thai baht rose 0.2% against the dollar each. The Bank of Thailand is expected to lower interest rates on Wednesday to support a slowing economy, according to a Reuters poll. The Malaysian ringgit was largely steady against the dollar. (Pratiksha) 

India Rupee: Expected range for rupee - Aug 12

NEW DELHI – Following are the expected support and resistance levels for the rupee on Tuesday, 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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