In Monday’s early morning trading, the Indian rupee experienced a modest depreciation, slipping by 4 paise to settle at 88.30 against the U.S. dollar. This slight decline was primarily driven by investor concerns regarding the potential impact of U.S. tariffs on India’s exports.
According to currency traders, the rupee’s movement remained constrained within a narrow range. It found itself at the crossroads of several significant factors: ongoing anxieties about U.S. trade tariffs, continuous outflows of foreign investment, and cautious optimism surrounding a potential U.S. interest rate reduction.
During interbank foreign exchange operations, the rupee commenced the day at 88.25. However, it soon ceded ground, reaching a low of 88.30 against the U.S. dollar, reflecting a 4 paise dip from its closing value on the previous trading day.
Just last Friday, September 12, the Indian rupee showed resilience, rebounding from its record low levels to close 9 paise stronger at 88.26 against the U.S. dollar.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, commented on the situation: “The rupee has faced persistent downward pressure, largely mitigated by the Reserve Bank of India’s (RBI) probable interventions. These actions have been crucial in managing volatility and preventing a rapid currency devaluation. It’s estimated that the RBI may have recently offloaded approximately $5-6 billion to bolster the rupee. Such strategic efforts are vital for navigating international trade complexities and sustaining overall market confidence.”
Bhansali further highlighted that market participants are now keenly observing the U.S. Federal Reserve’s (FED) upcoming announcement on September 17. Speculation around a potential rate cut by the FED is generating considerable uncertainty regarding the future trajectory of the dollar’s value.
Concurrently, the dollar index, which measures the U.S. dollar’s performance against a collection of six major global currencies, saw a modest increase of 0.07%, reaching 97.61.
In the commodities market, Brent crude, a key international oil price benchmark, was trading up by 0.58% at $67.38 per barrel in futures transactions.
Looking at the domestic stock markets, the Sensex registered a gain of 93.81 points, climbing to 81,998.51 in early trading. Similarly, the Nifty index advanced by 24.45 points, reaching 25,138.45.
Exchange data revealed that Foreign Institutional Investors (FIIs) were net buyers on Friday, September 12, acquiring equities valued at ₹129.58 crore.
Data released by the Reserve Bank of India (RBI) on Friday, September 12, indicated a significant boost to the nation’s foreign exchange reserves. For the week concluding September 5, these reserves surged by $4.038 billion, reaching a total of $698.268 billion, largely attributed to a substantial rise in the value of gold holdings.
This follows a prior week where overall reserves had already seen a robust increase of $3.51 billion, climbing to $694.23 billion.
Adding to the complex trade landscape, U.S. Commerce Secretary Howard Lutnick issued a firm statement, emphasizing that New Delhi needs to reduce its tariffs or anticipate significant challenges in its trade relations with the United States.
Lutnick’s remarks came during a Saturday, September 13, interview where he addressed questions regarding whether U.S. tariffs were adversely affecting “very valuable relationships” with key allies such as India, Canada, and Brazil.
He elaborated on his stance, stating, “The current trade relationship appears to be one-sided; they sell extensively to us, benefiting from our open market. Meanwhile, they restrict our access to their economy, even as our market remains broadly accessible for their goods and services.”