The Indian rupee closed at 87.60 on Thursday – the lowest closing ever for the currency after US President Donald Trump’s 25% plus penalty tariff announcement unnerved traders. It also logged the worst monthly fall since 2022. Intra-day, it touched low of 87.74 before recovering to close at 87.60, down 18 paise.
Rupee weakening
In July, the rupee weakened 2.15% (185 paise), highest since September 2022 and 2.5% (214 paise) in the current financial year. The rupee logged its intra-day low of 87.95 on Feb 10.
“Tariff concerns and elevated crude oil prices are currently contributing to the rupee’s depreciation. Additionally, a recent uptick in the US dollar index has added further pressure on the rupee,” said V R C Reddy, head of treasury, Karur Vysya Bank. The dollar index came back to 100 after two months, up 0.2% from the previous day.
The POV’s and dollar sale
The RBI intervened via dollar sales, protecting rupee from reaching 88 level, according to traders. The currency will continue to be under some pressure with a depreciating bias, they said.
In the current financial year, the rupee was the worst performer followed by the Phillipine pesso and Hong Kong Dollar. The Taiwanese Dollar appreciated the most at 10.85%.
“I expect the rupee to trade in the range of 87-88 should in the near-term range, assuming the RBI to protect the upper side,” said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP. As India and the US are still negotiating on the deal, forex traders keenly watch any commentary on that front.
The foreign outflows from the equity market is another factor weighing on the domestic currency. FPIs offloaded equities worth $2.1 billion in July, highest in five months.