The Indian Rupee saw limited movement in early Friday trading but ultimately lost 5 paise, settling at 88.76 against the U.S. dollar. This slight depreciation was primarily driven by a strong dollar on international markets and a cautious mood among domestic equity investors.
Currency traders noted that the USD/INR pair remained within a tight band. However, sentiment was significantly affected by a combination of U.S. policy decisions, simmering trade disputes, and widespread global economic uncertainties.
Adding to the pressure, the rupee was further weakened by continuous outflows of foreign investment and concerns surrounding the recent hike in U.S. visa fees.
Specifically, in the interbank foreign exchange market, the rupee began the day at 88.68. It then gradually weakened, hitting 88.76 against the U.S. dollar, marking a 5-paise drop from its closing rate on Wednesday.
This comes after a slight recovery on Wednesday, when the rupee gained 9 paise from its lowest-ever closing value, ending that day at 88.71 against the U.S. dollar.
It’s worth noting that equity, foreign exchange, bullion, and commodity markets were closed on Thursday for the Gandhi Jayanti and Dussehra holidays.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, suggested that exporters might explore options strategies to mitigate market volatility. He highlighted that ‘capital outflows, substantial gold imports, and a general global risk aversion have all played a part in the rupee’s current weakness and the challenging currency landscape.’
Bhansali further explained that market participants are factoring in ongoing pressures from U.S. economic policies, trade tensions, and worldwide uncertainties. These factors have collectively led to the Indian rupee depreciating by over 5 percent in the past year.
Concurrently, the dollar index, which measures the U.S. dollar’s value against six major global currencies, edged up by 0.04% to 97.88, reflecting its continued strength.
In commodity markets, Brent crude, the international oil price benchmark, saw a modest increase of 0.55%, trading at $64.46 per barrel in futures.
Closer to home, Indian equity markets opened lower. The Sensex fell by 299.17 points to 80,684.14, and the Nifty dropped 76.75 points, reaching 24,759.55.
Exchange data indicated that Foreign Institutional Investors (FIIs) were net sellers on Wednesday, offloading equities valued at ₹1,605.20 crore.
Separately, the Reserve Bank of India (RBI) decided to keep its key interest rates stable on Wednesday. This decision was made pending further clarity on the effects of U.S. tariffs, as well as assessing the full impact of previous rate cuts and recent tax adjustments.
Despite this, RBI Governor Sanjay Malhotra suggested that there might be room for monetary easing in the months ahead, aiming to buffer the economy against potential negative impacts from U.S. tariffs.