Is the Indian Rupee Gaining Ground Against the US Dollar?
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Synopsis
The Indian rupee has shown resilience, opening at 87.22 against the US dollar after a week of volatility. With ongoing foreign institutional investor selling and external pressures from US tariffs, the currency is poised for fluctuations. What does this mean for the Indian economy? Dive into the details.
Key Takeaways
- Indian rupee opened at 87.22 against the US dollar.
- Pressure from FII selling continues.
- Upcoming RBI policy decision is critical.
- Analysts predict fluctuations between 87.00 and 87.80.
- Retail inflation decline could prompt a rate cut.
Mumbai, August 4 (NationPress) - The Indian rupee appreciated to 87.22 against the US dollar at the market's opening on Monday, following a tumultuous week characterized by persistent FII selling and the 25 percent tariff announcement by US President Donald Trump.
The local currency gained strength as the dollar index declined and various Asian currencies appreciated.
Opening at 87.22 against the US dollar, the rupee rose by 32 paise from the previous closing of 87.54. The dollar index approached 100, prompting the rupee to fall 100 paise, and it closed at 87.52 per dollar on August 1, down from 86.52 per dollar on July 25, and hitting a low of 87.73 during the week.
Last week marked the fourth consecutive week of decline for the rupee as FIIs continued to divest from Indian equities and oil prices surged. FIIs maintained their selling trend for the fifth week in succession, with total sales for July reaching Rs 47,666 crore.
Market analysts anticipate the rupee will fluctuate between 87.00 and 87.50 today, with a broader range of 87.00 to 87.80 throughout the week, expecting the central bank to intervene to mitigate excessive volatility.
This week, the rupee may face continued pressure due to ongoing concerns regarding high US tariffs on Indian exports. Additionally, the upcoming policy decision from the Reserve Bank of India on August 6 is significant.
On another note, the likelihood of the US Fed reducing rates in September surged to 80 percent following data released on Friday, indicating that the US economy added fewer jobs than anticipated, while the unemployment rate climbed to 4.2 percent. The slowdown in job growth for July caused the dollar index to drop by 1.35 percent on Friday, marking its worst performance since mid-April.
Furthermore, Brent oil prices fell to $69.54 per barrel as OPEC+ announced a production increase for September, with ongoing worries about a cooling US economy and trade tariffs exerting additional pressure.
The yield on India’s benchmark 10-year 6.33 percent 2035 bond settled at 6.3680 percent last week, rising by 2 basis points. Traders expect the yield to fluctuate between 6.33 percent and 6.38 percent until the RBI's policy decision. Some market observers predict a 25 bps rate cut from the RBI, while HSBC Research anticipates rates will remain unchanged.
In June, India’s retail inflation experienced a significant decrease, reaching a level not seen in over six years, with forecasts suggesting it may hit a record low in July, raising expectations for a potential rate cut.
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Point of View
It is imperative to recognize the dynamic interplay between domestic currency strength and international economic pressures. The Indian rupee's performance is a reflection of broader market trends, influenced by both global events and local policies. Our commitment is to provide an unbiased and accurate perspective, keeping the interests of the nation at the forefront.
NationPress
05/10/2025
Frequently Asked Questions
What factors contributed to the rupee's strength?
The rupee strengthened due to a decline in the dollar index and an increase in various Asian currencies, alongside the impact of foreign institutional investor selling.
How is the RBI expected to respond?
Traders anticipate that the Reserve Bank of India will intervene to limit excessive volatility in the currency market, especially in light of upcoming policy decisions.
What is the outlook for the rupee in the coming week?
The rupee is expected to trade between 87.00 and 87.80 this week as traders monitor external pressures, including US tariffs and oil prices.
How did US economic data affect the rupee?
Weaker job data from the US increased the likelihood of a rate cut by the Federal Reserve, leading to a decline in the dollar index, which positively impacted the rupee.
What is the significance of retail inflation in India?
Falling retail inflation raises the possibility of a rate cut by the RBI, which could further influence the rupee's performance and economic stability.
