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Informist, Wednesday, Aug. 13, 2025

By Pratiksha

NEW DELHI – The rupee Wednesday settled at a two-week high against the dollar as the dollar index slumped after the US July inflation print solidified expectations of the US Federal Reserve cutting interest rates in September, dealers said. The Indian currency posted its biggest single-day gain in nearly six weeks.    

"The dollar index weakness led to people being caught long (on dollar), which is why there was a sudden spike in rupee," a dealer at a foreign bank said. "I don't think anybody was expecting this kind of jump."

The rupee ended at 87.4400 a dollar Wednesday, 0.3% higher from its previous close. The Indian currency traded in a range of 35 paise during the day. Other Asian currencies rose between 0.1-0.6% against the dollar, with the Philippine peso the best performer. 

The Indian unit's reaction to the overnight sharp fall in the dollar index at open was only somewhat positive, as it was slightly higher at 87.6500 a dollar. 

Data released Tuesday showed US CPI rose 0.2% last month after a gain of 0.3% in June, in line with expectations. In the 12 months through July, CPI increased 2.7%, the same as in June. Economists polled by Reuters had forecast the CPI rising 0.2% and increasing 2.8% year-on-year. 

The data also indicated that the transmission of US President Donald Trump's broad-based import tariffs to prices so far has been contained. Fed funds futures traders are now pricing in a 96% probability of a 25-basis-point cut at the Fed's September meeting, compared to 84% before the data was released, according to the CME Group's FedWatch Tool.

Just two hours into trading, the Indian unit erased all of its gains and hit the day's low of 87.7250 a dollar as banks bought the greenback on behalf of foreign portfolio investors, looking to withdraw funds from Indian markets, especially the government debt market, dealers said. So far this month, FPIs have taken out $552.3 million from domestic markets on a net basis.

"The FPI sell-off continues, both in bond and equity. There is still no clarity on US tariff, so that risk off is still there," a dealer at a state-owned bank said. "Maybe the outflow intensity has gone down, but it's there."

However, the dollar index fell further during European trading, prompting some big state-owned and foreign banks to sell dollars, in order to trim their long dollar bets. This led to stop losses being triggered on long dollar bets around the key resistance level of 87.50 a dollar, sending the Indian unit to the day's high of 87.3800. "87.50 was held for so long, and finally it was broken today. During the first half, nobody expected this," a dealer at a private-sector bank.

At 1530 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 97.64, against 98.05 Tuesday and 98.50 Monday. The index fell to 97.63 during the day, its lowest level since Jul. 28.

Meanwhile, some banks stepped in to buy dollars on behalf of importers, who wanted to take advantage of the relatively lower dollar/rupee levels, limiting gains for the local unit, dealers said. However, dollar purchases from importers were not aggressive in nature as they expect the Indian unit to appreciate further, they said. 

FORWARDS

The one-year dollar/rupee forward premium ended at an over 12-week high as the July US inflation data reinforced expectation of a rate cut by the Federal Reserve next month, dealers said. Forwards of a currency pair are reflective of the interest rate differential between two countries. 

Meanwhile, data released on Tuesday showed India's headline CPI inflation fell to 1.55% in July, the lowest print since June 2017. While this gives space to the RBI's Monetary Policy Committee to lower interest rates further, most market participants are still unsure if the rate-setting panel will go for a rate cut at the next meeting in October after keeping rates on hold last week. 

With the Fed likely to go for a rate cut in September and slim chances of a rate cut by the RBI for the rest of the year, the interest rate differential between the US and India may widen further, supporting forward premiums, dealers said. 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 2.09%, against 2.07% Tuesday. On an absolute basis, the premium was 183.16 paise, against 182.13 paise Tuesday.

OUTLOOK

On Thursday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said. Market participants will continue to closely monitor developments related to US tariffs. 

Market participants are also keeping a close eye on Trump and his Russian counterpart Vladimir Putin's meeting on Friday in Alaska, where the two leaders will hold discussions on stopping the war in Ukraine. The meeting holds signficance as the US last week slapped an additional 25% tariff on Indian goods, on top of a 25% tariff announced previously, citing New Delhi's continued purchases of Russian oil. The meeting's outcome could shape expectations on whether trade relations between India and the US will get better going ahead.

Some dealers said volume in the currency market may be lower than usual on Thursday ahead of a truncated trading week, as the market is closed Friday on account of Independence Day. However, they expect foreign portfolio outflows to weigh on the Indian unit as investors remain risk averse, dealers said. 

Most market participants expect the central bank to intervene in the domestic spot market and offshore non-deliverable forwards market through dollar sales in case 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 87.30 to 87.80 a dollar. Dealers peg technical resistance for the rupee at 87.30 a dollar. 

India Rupee - World FX: Dollar index hits over 2-week low post US CPI data

NEW DELHI – The dollar index fell further during European trade, hitting an over two-week low, as the July US inflation print led to growing bets of a rate cut by the Federal Reserve in September. 

Data released Tuesday showed the US CPI rose 0.2% last month after a gain of 0.3% in June. In the 12 months through July, the CPI increased 2.7%, unchanged from 2.7% in June. Reuters' poll had forecast the CPI rising 0.2% from June and increasing 2.8% on year. The data suggested that the pass-through from US President Donald Trump's broad-based import tariffs to prices so far has been limited.

Fed funds futures traders are now seeing a 96.2% probability of a 25-basis-point cut at the Fed's September meeting, compared with 84% before the data released, according to the CME Group's FedWatch Tool. At 1445 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 97.71, against 98.05 Tuesday and 98.50 Monday. The index fell to 97.70 during the day, its lowest level since Jul. 28.

Both the pound sterling and the euro rose 0.4% against the dollar each due to weakness in the dollar index. Data released on Wednesday showed Spain's European Union-harmonised 12-month inflation rate rose to 2.7% in July, up from 2.3% in the period through June. The Australian dollar and New Zealand dollar rose 0.3% and 0.5% against the dollar, respectively.

Further, the Japanese yen rose 0.4% against the dollar after data showed producer price index inflation rose slightly more than expected in July. However, the rise was at the slowest pace in 11 months as local producers dealt with higher global tariffs. The producer price index grew 2.6% on year in July against expectations of 2.5% rise, but slowed sharply from the 2.9% rise seen in the prior month. Meanwhile, data also showed on Wednesday that Japan's annual wholesale inflation slowed for the fourth straight month in July. (Pratiksha)

India Rupee: Stays higher as dollar index falls further; FPI outflows weigh

NEW DELHI – The rupee remained higher against the dollar as the dollar index fell further, hitting an over two-week low, during European trade as the July US inflation print solidified bets of a rate cut by the Federal Reserve in September, dealers said. However, banks' dollar purchases for foreign portfolio outflows limited gains for the Indian unit, they said. 

"In the morning, outflows from debt market took the rupee lower but then dollar weakness is still supporting and should continue for the rest of the day," a dealer at a private-sector bank said. Data released Tuesday showed the US consumer price index rose 0.2% last month after a gain of 0.3% in June. In the 12 months through July, the CPI increased 2.7% after rising 2.7% in June. Reuters' poll had forecast the CPI rising 0.2% and increasing 2.8% on year. 

Fed funds futures traders are now pricing in a 96.3% probability of a 25-basis-point cut at the Fed's September meeting, compared with 84% before the data released, according to the CME Group's FedWatch Tool. At 1340 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 97.79, against 98.05 Tuesday and 98.50 Monday. The index fell to 97.77 during the day, its lowest level since Jul. 28.

Banks bought the greenback on behalf of foreign portfolio investors, looking to pull out funds from Indian markets, especially the government debt market, which dragged the Indian unit to the day's low of 87.7250 a dollar, dealers said. 

Some banks also bought the greenback on behalf of importers, who wanted to make the most of the relatively lower dollar/rupee levels, weighing on the local unit, dealers said. However, the dollar purchases from importers were not aggressive in nature as they expect the Indian unit to appreciate further, they said. 

During the day, the rupee is seen moving in a range of 87.50 to 87.70 against the dollar. Dealers peg key technical resistance for the rupee at 87.50 a dollar.  (Pratiksha)

India Rupee: Fwd premium near 12-wk high as US CPI cements Fed rate cut bets

NEW DELHI – The one-year dollar/rupee forward premium rose to a near 12-week high as the July US inflation data reinforced expectation of a rate cut by the Federal Reserve next month, dealers said. Forwards of a currency pair are reflective of the interest rate differential between two countries. "The US CPI was better than expected. I was expecting at least some on-year and on-month rise in inflation but nothing of that sort happened," a dealer at a state-owned bank said. 

Data released Tuesday showed the US consumer price index rose 0.2% last month after a gain of 0.3% in June, in line with expectations. In the 12 months through July, the CPI increased 2.7% after rising 2.7% in June. Economists polled by Reuters had forecast the CPI rising 0.2% and increasing 2.8% year on year. The data suggested that the pass-through from US President Donald Trump's broad-based import tariffs to prices so far has been limited.

Following the data, Fed funds futures traders are now pricing in a 94% probability of a 25-basis-point cut at the Fed's September meeting, compared with 84% before the data released, according to the CME Group's FedWatch Tool. Meanwhile, data released on Tuesday showed India's headline CPI inflation fell to 1.55% in July, the lowest print since June 2017. While this gives space for the RBI's Monetary Policy Committee to lower interest rates further, most market participants are still unsure if the rate-setting panel will go for a rate cut at the next meeting after keeping rates on hold last week. 

With the Fed likely to go for a rate cut in September and slim chances of a rate cut by the RBI for the rest of the year, the interest rate differential between the US and India may widen further, supporting forward premiums, dealers said. Market participants see strong support for the one-year dollar/rupee forward premium at 2.10%. 

At 1305 IST, the one-year exact period dollar/rupee premium was 2.09%, against 2.07% Tuesday. On an absolute basis, the premium was 183.16 paise, against 182.13 paise Tuesday. (Pratiksha)

India Rupee: Technical levels for rupee - Aug 13

NEW DELHI – At 1112 IST, the rupee was at 87.6950 per dollar. At 0900 IST, the rupee was at 87.6500 a dollar, against the previous close of 87.7125. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)

India Rupee: Up as dollar index falls after US CPI cements Fed rate cut bets

NEW DELHI – The rupee rose against the dollar Wednesday as bets of a rate cut by the US Federal Reserve next month were cemented after the US inflation print came in line with expectations, resulting in a sharp fall in the dollar index, dealers said. "The rise (in rupee) is after the US CPI data came soft and dollar fell," a dealer at a private-sector bank said. "But I don't think the gains will sustain through the day because people will be up for buying the dollar. I see 87.70 kind of levels during second half of the day."

Data released Tuesday showed the US consumer price index rose 0.2% last month after a gain of 0.3% in June. In the 12 months through July, the CPI increased 2.7% after rising 2.7% in June. Reuters' poll had forecast the CPI rising 0.2% and increasing 2.8% on year. The data indicated that the pass-through from US President Donald Trump's sweeping import tariffs to prices so far has been contained.

Fed funds futures traders are now pricing in a 94% probability of a 25-basis-point cut at the Fed's September meeting, compared to 84% before the data released, according to the CME Group's FedWatch Tool. At 0930 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.02, against 98.05 Tuesday and 98.50 Monday. The index hit a low of 97.90 Tuesday. 

However, market participants expect gains in the Indian currency to be limited as risk appetite among investors continues to stay dampened owing to the US tariff related uncertainty. They also expect importers to step in to buy dollars, to take advantage of the relatively lower levels, which may weigh on the Indian unit. 

"The rupee is trading within a narrow range of 87.50 to 87.70 (a dollar). A decisive break above or below this range will likely determine its next direction, largely influenced by capital inflows into the Indian market amid expectations of a US rate cut," Amit Pabari, managing director at CR Forex, said in a note.

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.  (Pratiksha)

India Rupee - Asia FX: Most rise as dollar index hits 2-week low post US CPI

NEW DELHI – Most Asian currencies rose against the dollar Wednesday as the dollar index hit an over two-week low after an in-line-with-expectation inflation print bolstered bets of a rate cut by the US Federal Reserve in September. 

Data released on Tuesday showed the US consumer price index rose 0.2% last month after a gain of 0.3% in June, in line with expectations. In the 12 months through July, the CPI increased 2.7%, unchanged from June. Economists polled by Reuters had forecast the CPI rising 0.2% and increasing 2.8% year-on-year. The data suggested that the pass-through from US President Donald Trump's broad-based import tariffs to prices so far has been limited.

Following the data, Fed funds futures traders are now pricing in a 94% probability of a 25-basis-point cut at the Fed's September meeting, compared to 84% before the data released, according to the CME Group's FedWatch Tool. At 0855 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.04, against 98.05 Tuesday and 98.50 Monday. The index hit a low of 97.90 on Tuesday. 

The Indonesian rupiah rose 0.3% against the dollar, the most amongst its peers, while both the Taiwan dollar and Philippine peso rose 0.2%. Media reports said a large portion of southern and eastern Taiwan shut down on Wednesday and hundreds of flights were cancelled ahead of the arrival of Typhoon Podul later in the day, with thousands of people evacuated.

The Malaysian ringgit was also up 0.2% against the dollar. Both the South Korean won and the Thai baht rose 0.1% 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.

Bucking the trend, the Chinese yuan was flat against the greenback after US Treasury Secretary Scott Bessent said on Tuesday that US trade officials will meet again with China within the next two or three months to discuss the future of the economic relationship between the two countries. The comments came a day after the trading partners extended a tariff truce for another 90 days. (Pratiksha) 

India Rupee: Expected range for rupee - Aug 13

NEW DELHI – 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)

End

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

Edited by Vandana Hingorani

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