Indian Rupee Weakens 3 paise to ₹85.87 Against the US Dollar Amid Global Uncertainties

The Indian Rupee experienced further weakening on Tuesday due to foreign institutional investors (FIIs) resuming their selling of domestic equities. This selling pressure occurred against a backdrop of ongoing global uncertainties stemming from US threats to impose an additional 50 per cent tariff on China.

Rupee's Opening and Subsequent Depreciation

The domestic currency opened weaker by 3 paise at ₹85.87 against the US dollar on Tuesday, following a closing of 85.84 on Monday. The Rupee continued its downward trend, depreciating further to ₹85.92. This follows a day when the currency recorded its worst single session since February 6, 2023.

Impact of Dollar Strength and US-China Trade Tensions

The rise in the value of the US dollar also contributed to the weakening of the Indian Rupee. The dollar index surged on Monday as US bond yields experienced a significant jump of over 20 basis points in a single session. Although the dollar index later saw a slight decrease of 0.28 per cent to 102.96 as of 9:15 AM IST , the earlier surge had made an impact. US President Donald Trump's warning of a 50 per cent tariff on Chinese goods, unless China removed its 34% retaliatory duties, further increased global tensions. Beijing responded to these potential additional tariffs by vowing to "fight to the end".

Foreign Outflows and RBI Intervention Expectations

According to Amit Pabari, managing director at CR Forex Advisors, the Indian rupee faced sharp depreciation on Monday due to foreign outflows and global tensions. Pabari suggested that "the RBI may need to intervene as nearly $35 billion worth of forward contracts are scheduled to mature between April and June". On Monday, FIIs sold equities worth ₹9,040.01 crore, while domestic institutional investors (DIIs) bought stocks worth ₹12,122.45 crore, marking their second-biggest single-day buying this year.

Anticipated RBI Monetary Policy Decision

The decision from the Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC) meeting, was considered a key factor to watch. Pabari indicated that "the RBI is now widely expected to cut rates by 25 bps, lowering the repo to 6 per cent, as a pre-emptive move amid growing uncertainty and trade shocks".

Rupee's Trading Range and Crude Oil Prices

Pabari noted that "the rupee found support near the ₹85.50 level and moved towards the ₹86.00– ₹86.20 range". Meanwhile, crude oil prices were trading near a four-year low due to uncertainty surrounding tariffs weighing on the global growth outlook. As of 9:15 AM IST, Brent crude oil was up 1.2 per cent to $64.98 per barrel, and WTI crude was up 1.30 per cent at $61.49 per barrel.

Rupee's Expected Trend and Hedging Strategies

Anil Kumar Bhansali, head of treasury and executive director of Finrex Treasury Advisors LLP, projected that "the broader trend of the rupee for the next one month could be between ₹84.50 to ₹86.50". He advised that "Exporters need to hedge near ₹86.00 levels to protect their costing while importers may wait for further hedging till ₹85.25 at least"

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