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Informist, Friday, Aug. 29, 2025

By Pratiksha

MUMBAI – After an extremely volatile trading day, the rupee settled below the psychologically-crucial 88-per-dollar for the first time and ended at a record closing low against the dollar Friday, as US tariff worries prompted importers and foreign portfolio investors to aggressively buy dollars, dealers said. This was the Indian currency's worst day in over a month. 

Notably, the Reserve Bank of India was mostly missing in action and only intervened sporadically to smoothen the volatility in the exchange rate, according to dealers. This also exacerbated the fall in the rupee, dealers, who expected the central bank to prevent the rupee from testing the 88-per-dollar mark, said. 

"Nobody expected the kind of move that happened today. We had a lot of catching up to do on the US tariff front, so I think that played out finally," a dealer at a foreign bank said. "After 87.80 broke, a sense of panic came in and then there was no looking back for the rupee. A lot of important levels broke in a few minutes."  

After hitting a lifetime low of 88.3100 a dollar, the rupee settled at 88.1950 on Friday, depreciating 0.7% from the previous close. The Indian unit was the second-worst performer amongst its Asian peers, with the Indonesian rupiah being the biggest loser.

The Indian currency started the day on a weaker note at 87.6950 as risk sentiment among investors took a beating as they assessed the impact of US tariffs on Indian goods, dealers said. The US imposed an additional 25% tariffs on India Wednesday, taking the total tariffs on Indian goods to 50%, making India one of the most impacted countries by Washington's tariffs. So far, there has been no positive development in India-US trade relations. 

Shortly after the market opened, the Indian currency came under further downward pressure as banks bought dollars on behalf of importers, who wanted to meet their month-end payment requirements, dealers said. Oil marketing companies and other importers also bought the greenback in fear that the Indian currency might depreciate further due to the impact of US tariffs on India. 

Moreover, banks bought the greenback on behalf of foreign portfolio investors, looking to pull out funds from domestic equities, which also weighed on the Indian unit, dealers said. Domestic equities have been seeing consistent foreign outflows this month owing to risk aversion among investors. So far this month, FPIs have net withdrawn $2.60 billion from domestic equities. On Friday, both the Nifty 50 and Sensex ended 0.3% lower each. 

However, as soon as the rupee fell to the key support of 87.80 a dollar, the central bank likely stepped in to sell dollars to prevent a further fall, dealers said. However, as importers and FPIs stepped up their dollar purchases, the RBI let the Indian currency hit a record low and subsequently it slumped below the key 88-per-dollar figure.

Following the breach below 88.00, banks' stop-losses on short-dollar bets were triggered, further aggravating the decline in the rupee, dealers said. "There was a lot of panic in the market after the figure (88) broke," a dealer at a state-owned bank said. "There was just buying (of dollars) happening all around."

The RBI, meanwhile, was missing in action for most part of the trade, and only intervened sporadically around the 88.30-88.25 levels, dealers said. "Limited (RBI) intervention, stop losses triggered, weaker regional currency and foreign funds outflows. These were the main culprits (behind the rupee's fall today)," said Dilip Parmar, currency analyst at HDFC Securities. "Dollar-rupee has breached the psychological level of 88 and made a record low... next 88.55 will be on the eye while support has been shifted to 87.90."

FORWARDS

The one-year dollar/rupee forward premium ended lower Friday as banks sold forward dollars on behalf of exporters, noting the relatively higher premiums, dealers said. The one-year forward premium has jumped almost 25 basis points in August. 

Forward premiums rose sharply this month owing to growing expectations of a rate cut by the US Federal Reserve next month. Forwards of a currency pair reflect the interest rate differential between the two countries. Fed funds futures traders now see an 85.1% probability of the Fed lowering interest rates by 25 basis points next month, according to the CME FedWatch tool. 

Fed Governor Christopher Waller on Thursday said he wants to start cutting interest rates next month and "fully expects" more rate cuts to follow to bring the Fed's policy rate closer to a neutral setting, stepping up his call to lower short-term borrowing costs.

Traders now await the release of the key US July Personal Consumption Expenditures Price Index data, due later in the day, for further cues on the US rate trajectory. Economists polled by Reuters expect the PCE price index to rise 2.6% in July, the same as in June.

Meanwhile, some banks bought dollars for forward delivery on behalf of importers, noting the slump in the rupee in the spot market, which limited the fall in premiums, dealers said. 

Dealers view 2.10% as a key technical resistance level for the one-year forward premium in the near term. At 1530 IST, the one-year exact period dollar/rupee premium was 2.19%, against its previous close of 2.20%. On an absolute basis, the premium was 192.58 paise, against 193.16 paise Thursday.

OUTLOOK

On Monday, the rupee will take cues from movement in the dollar index after the release of the US July Personal Consumption Expenditures Price Index data, the US Fed's preferred measure of underlying inflation, dealers said. The key economic data is due on Friday and will be closely monitored for cues on the Fed's interest rate trajectory.

Following the sharp drop in the rupee on Friday, dealers expect importers to continue buying dollars due to fears that the rupee may depreciate further amid concerns about US tariffs on India, dealers said. The rupee may continue to be weighed by dollar purchases for foreign portfolio outflows amid the weak risk appetite among investors, they said.

However, the key thing to watch out for will be how much and at what level the central bank will step in to prevent a sharp fall in the rupee, dealers said. "These are uncharted territories and no one really knows where the rupee will go from here," a dealer at a foreign bank said. "The important thing to see now is if the RBI will intervene in the market. And if they will, will they intervene in the spot or the offshore NDF (non-deliverable forwards) market?" a dealer at a foreign bank said. 

During the day, the rupee may move in a range of 87.90 and 88.50 against the dollar. Dealers peg key technical support for the rupee at 88.50 a dollar. 

"While a weaker rupee theoretically makes Indian goods cheaper abroad, offering some cushion for exporters, the sheer scale of tariff-led disruption overshadows this benefit. Until clarity emerges on the tariff front, the bias for the rupee remains depreciative," Amit Pabari, managing director at CR Forex, said in a note.

India Rupee - World FX: Euro dn as Germany retail sales fall more than view

MUMBAI - The euro fell 0.1% against the greenback after data released Friday showed German retail sales fell much more than expected in July. Retail sales fell by 1.5% compared with July, while analysts in a Reuters poll had predicted a 0.4% decrease.

On the other hand, French consumer prices rose slightly less than anticipated in August. France's harmonised inflation rate, adjusted for comparison with other Eurozone countries, was 0.8% on year in August, down from a 0.9% rise in July, and below the average rise of 0.9% expected by Reuters' poll.

The European Central Bank policymakers were divided on whether inflation was more likely to come in higher or lower than expected when they met in July, ECB accounts showed Thursday. The ECB left its key rate at 2% at its Jul. 23-24 meeting and it will probably do so again next month before discussions about further cuts likely resume in the autumn, especially if the economy weakens under US tariffs, Reuters reported citing sources.

The Japanese yen fell 0.1% against the dollar after Japan's factory output fell 1.6% in July from June, worse than market forecast for a 1.0% fall, government data showed Friday. Tokyo August core consumer prices rose 2.5% on year, slowing from a 2.9% rise in July. The data complicated market participants' expectation around Bank of Japan's rate hiking cycle. The Swiss franc traded broadly steady against the dollar. 

The dollar index weakened on growing expectations of a rate cut by the Fed next month, which may support the rupee, dealers said. Fed Governor Christopher Waller on Thursday said he wants to start cutting interest rates next month and "fully expects" more rates cuts to follow to bring the Fed's policy rate closer to a neutral setting, stepping up his call to lower short-term borrowing costs.

Meanwhile, the second estimate released Thursday showed US GDP growth rose at a 3.3% annualised rate in Apr-Jun. The economy was initially reported to have grown 3.0% during the quarter. Economists polled by Reuters had expected GDP growth would be raised to a 3.1% rate. Market paticipants await key US July Personal Consumption Expenditures Price Index data, due later in the day.

Fed funds futures traders now see an 85.2% probability of the Fed lowering interest rates by 25 basis points next month, according to the CME FedWatch tool. At 1540 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 97.97, against 97.90 Thursday and 98.18 Wednesday. The New Zealand dollar rose 0.1% against the greenback Friday as Reserve Bank of New Zealand Chairman Neil Quigley resigns with immediate effect. The pound sterling fell 0.3% and the Australian dollar traded steady against the greenback.  (Rati Chaphekar) 

India Rupee: Hits record low, below 88/$1 as importers buy dlrs; RBI absent

India Rupee: Hits record low, below 88/$1 as importers buy dlrs; RBI absent

MUMBAI – The rupee hit a record low against the dollar Friday, slumping below the psychologically crucial 88-per-dollar mark, as banks continuously bought the greenback on behalf of importers and foreign portfolio investors, leading to stop-losses being triggered on short dollar bets, dealers said.

The Reserve Bank of India's lack of active intervention in the market also weighed on the Indian currency, they said. The rupee hit a lifetime low of 88.2950 a dollar during the day. "The RBI seems to be gradually letting the rupee depreciate. Looks like they are not protecting any levels," a dealer at a private-sector bank said. "There is a lot of month-end buying (of dollars) in the market"

Dealers said there was strong buying of dollars in the market on behalf of importers who looked to meet their month-end payment obligations. Moreover, FPIs continued exiting domestic equities as investors' risk appetite remained weak amid concerns related to the impact of US tariffs on the Indian economy.  

Earlier in the day, the central bank tried to prevent the rupee from falling below the key technical support of 87.80 a dollar. However, as the rupee fell below the key level, the RBI seemingly remained absent from the market and let the rupee depreciate sharply, dealers said. 

For the rest of the day, the rupee is seen moving in a range of 87.90-88.30 against the greenback. Dealers peg key technical support for the rupee at 88.30 a dollar. (Pratiksha)

India Rupee: Fwd premium falls as exporters sell fwd dollars at high levels

MUMBAI – The one-year dollar/rupee forward premium fell Friday as banks sold forward dollars on behalf of exporters, noting the relatively higher levels, dealers said. The one-year forward premium has jumped almost 25 basis points in August. 

"Forwards got quite overpaid, which is why we are seeing profit booking around these levels," a dealer at a private-sector bank said. "But I don't think (one-year) forwards will fall below 2.10% anytime soon since the US rate cut expectations are still there."

Forward premiums rose sharply this month owing to growing expectations of a rate cut by the US Federal Reserve next month. Forwards of a currency pair is reflective of the interest rate differential between the two countries. Fed funds futures traders now see an 85.1% probability of the Fed lowering interest rates by 25 basis points next month, according to the CME FedWatch tool. 

Fed Governor Christopher Waller on Thursday said he wants to start cutting interest rates next month and "fully expects" more rate cuts to follow to bring the Fed's policy rate closer to a neutral setting, stepping up his call to lower short-term borrowing costs.

Traders now await the release of the key US July Personal Consumption Expenditures Price Index data, due later in the day, for further cues on the US rate trajectory. Economists polled by Reuters expect the PCE price index to rise 2.6% in July, matching June's rise.

Dealers see 2.10% as a key technical resistance for the one-year forward premium in the near-term. At 1245 IST, the one-year exact period dollar/rupee premium was 2.18%, against its previous close of 2.20%. On an absolute basis, the premium was 191.65 paise, against 193.16 paise Thursday. (Pratiksha)

India Rupee: Sharply down as importers buy dlrs; RBI steps in to limit fall

MUMBAI - The rupee fell sharply against the dollar as banks bought dollars for oil importers and foreign portfolio outflows, dealers said. However, losses in the Indian currency were limited as the Reserve Bank of India likely intervened through dollar sales in the spot market, they said. 

The central bank likely intervened around 87.80-87.81 a dollar, levels around which it had stepped in earlier in the week as well, dealers said. However, most dealers said the intervention was not aggressive in nature. 

In case the rupee convincingly falls below the 87.80-mark, dealers expect it to test the psychologically-crucial 88-per-dollar mark. "There is a lot of demand (for dollars) from importers. Oil importers are also front loading their payments. I expect 87.90 happening during the day," a dealer at a state-owned bank said. "FPI outflows are there as well." 

Banks bought dollars on behalf of oil marketing companies and other importers, looking to meet their month-end payment requirements, dealers said. The Indian currency was also weighed by dollar purchases for foreign portfolio outflows from Indian equities, they said. 

Market participants now await the release of the key US July Personal Consumption Expenditures Price Index data, due later in the day, for further cues on the US rate trajectory. Economists polled by Reuters expect the PCE price index to rise 2.6% in July, matching June's rise. 

For the rest of the day, the rupee is seen moving in a range of 87.50-87.90 against the greenback. Dealers peg key technical support for the rupee at 87.90 a dollar. (Pratiksha)

India Rupee: Technical levels for rupee - Aug 29

MUMBAI – At 1030 IST, the rupee was at 87.7725 per dollar. At 0900 IST, the rupee was at 87.6950 a dollar, against the previous close of 87.6250. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)

India Rupee - Asia FX: Mixed before US PCE data; Indonesian rupiah slips 1%

MUMBAI – Asian currencies traded mixed against the dollar Friday ahead of the release of the key US July Personal Consumption Expenditures Price Index data, due later in the day. Market participants await the key economic data for more cues on the Federal Reserve's rate trajectory. Economists polled by Reuters expect the PCE price index to rise 2.6% in July, matching the rise in June.

The dollar index remained subdued on rising expectations of an interest rate cut by the US Fed in September. US President Donald Trump's recent threats to fire Fed Governor Lisa Cook has led to investors questioning the independence of the US central bank, which also weighed on the dollar index.  

Meanwhile, the second estimate of US GDP data released Thursday showed that economic growth rose at 3.3% annualised rate in Apr-Jun. The economy was initially reported to have grown 3.0% during the quarter. Economists polled by Reuters had expected GDP growth would be raised to a 3.1% rate. 

Fed funds futures traders now see an 83.1% probability of the Fed lowering interest rates by 25 basis points next month, according to the CME FedWatch tool. At 0930 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.00, slightly higher than 97.90 Thursday but lower than 98.18 Wednesday.

The Indonasian rupiah fell 1% against the greenback Friday, likely due to dampened risk sentiment among investors amidst the ongoing protests involving thousands of students, workers, and activists against housing allowance for the members of Parliament, that is almost 10 times the Jakarta minimum wage. At 0930 IST, Indonesia's Jakarta Composite index was down 1.8%.

Meanwhile, Reuters reported citing Erwin Gunawan Hutapea, the head of Bank Indonesia's monetary department, that the central bank will remain active in the foreign exchange market to ensure the rupiah aligns with fundamentals. The central bank will continue to take action to stabilise the rupiah by intervening in offshore and onshore non-deliverable forward markets and the spot market, he said.

The Philippine peso traded higher against the dollar, up 0.2%, even after the Bangko Sentral ng Pilipinas' cut the key policy rate by 25 bps Thursday and for the third straight meeting, in line with the expectations. The central bank indicated further policy easing in the remaining year. 

The Malaysian ringgit rose 0.1% against the greenback while the Chinese yuan traded steady Friday. The South Korean won fell 0.2% against the dollar while both the Taiwan dollar and the Thai baht fell 0.1% each.  (Rati Chaphekar) 

India Rupee: Falls as investors' risk appetite weak amid US tariff worries

MUMBAI – The rupee fell against the dollar on Friday as risk sentiment among investors remained damp as they assessed the impact of 50% US tariffs on the Indian economy, dealers said. "There are no positives for the rupee as such, so risk sentiment is weak," a dealer at a private sector bank said. 

The 25% tariffs set by the US on imports from India increased to 50% on Wednesday, making India one of the countries impacted the most by Washington's duties. So far, there has been no positive development in India-US trade relations. "Exporter flows are drying up and they may dry up more due to tariffs in future," a dealer at a state-owned bank said. 

Further, a dealer said that some banks bought dollars, likely for foreign fund outflows from Indian equities, which also weighed on the Indian unit. The rupee opened at 87.6950 a dollar, against 87.6250 on Thursday.  

Dealers expect dollar demand on behalf of importers during the day around the current dollar/rupee levels, as the depreciation bias on the rupee stays intacts amid the tariff headwinds. Importers may also buy dollars to meet their month-end payment needs, weighing on the rupee, they said. 

Market participants now await the release of the key US July Personal Consumption Expenditures Price Index data, due later in the day, for further cues on the US rate trajectory. Economists polled by Reuters expect the PCE price index to rise 2.6% in July, matching June's rise. 

The dollar index remained broadly weak ahead of the key economic data. At 0933 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 97.99, against 97.90 Thursday and 98.18 Wednesday.

For the rest of the day, the rupee is seen moving in a range of 87.40-87.80 against the greenback. Dealers peg key technical support for the rupee at 87.80 a dollar. (Pratiksha)

India Rupee: Expected range for rupee - Aug 29

MUMBAI – Following are the expected support and resistance levels for the rupee on Friday, 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 Saji George Titus

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