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Business Standard
a day ago
- Business
- Business Standard
Rupee hits 5-month low after Trump's tariff threat, logs 0.7% drop
The rupee depreciated 0.7 per cent against the dollar on Wednesday, marking its worst single-day fall in over two and a half months, after US President Donald Trump suggested a 20–25 per cent tariff on India. Post market hours, Trump announced a 25 per cent tariff along with an unspecified penalty from August 1 for India's purchases of oil and arms from Russia. The local unit weakened by 60 paise to settle at 87.42 per dollar — its lowest level since February 28 this year. So far this month, the rupee has declined 1.9 per cent and 2.12 per cent in calendar year 2025. It is heading for its worst monthly performance since September 2022, when it had fallen by 2.32 per cent. The rupee is expected to remain under pressure following the tariff and penalty announcements. The Reserve Bank of India (RBI) has previously intervened in the foreign exchange market to curb undue volatility. The country's foreign exchange reserves, currently at $695 billion, provide a cushion against such fluctuations. 'The tariff rate is higher than expected. The market was anticipating a rate below 20 per cent, which would have given us a distinct edge over our APAC peers,' said Abhishek Goenka, founder and chief executive officer, IFA Global. 'Moreover, there is uncertainty around the penalty that would be imposed for procuring crude from Russia. This will likely keep markets on edge. We may see the rupee continue weakening. Implied rupee spot is already close to all-time lows in the NDF (non-deliverable forward) market,' Goenka added. Dealers said the central bank was not seen intervening in the foreign exchange market on Wednesday. Adding to the rupee's weakness are ongoing foreign portfolio investor (FPI) outflows from Indian equity markets. Analysts noted that global investors are increasingly allocating capital to developed markets, which are trading at record highs. 'The breaching of the psychological level of 87, coupled with a technical breakout, spurred greater dollar demand from importers and triggered short covering. Following this substantial rally since the start of the month, the immediate support level for spot USDINR has shifted to 87, while the resistance is now seen at 87.70,' said Dilip Parmar, senior research analyst, HDFC Securities. The rupee is now near its all-time closing low of 87.58, touched on February 6 this year. Just days later, on February 10, it came close to 88, touching 87.95 during intra-day trade. Meanwhile, the US dollar continues to strengthen, marking its best monthly performance so far in 2025. On Wednesday, however, it slipped slightly by 0.05 per cent to 98.83. 'Tomorrow, the US Federal Reserve will announce its interest rate decision, and markets will respond accordingly. FPIs are also sellers in the market, keeping pressure on the rupee,' said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors.
Business Recorder
21-07-2025
- Business
- Business Recorder
Indian rupee to track dollar recovery, bond market focused on rate cut bets
MUMBAI: The Indian rupee will likely take cues from how far the dollar's nascent recovery extends this week, while bonds will move based on expectations of interest rate cuts by the local central bank. The rupee closed at 86.1475 on Friday, down 0.4% on the week. It is expected to hover between 85.80 and 86.70 in the near-term with a slight weakening bias, according to traders. After falling for five straight months, the dollar index is up 1.5% in July so far, as strong U.S. economic data and indications that tariffs have started pushing up prices lowered rate-cut expectations in the world's largest economy. Remarks from Federal Reserve Chair Jerome Powell on Tuesday will be in focus, in light of the persistent criticism he has faced from U.S. President Donald Trump for not lowering interest rates. The odds of a U.S. rate cut in September are around 53%, per CME's FedWatch tool. India's ongoing trade negotiations with the U.S. will also be in focus alongside quarterly earnings reports from local companies, which have a bearing on foreign portfolio flows into equities. Forex advisory firm IFA Global recommended that importers cover near-term liabilities around 86, while suggesting exporters hedge around 86.25. Meanwhile, India's 10-year benchmark 6.33% 2035 bond yield , which settled last week at 6.3058%, is expected to move in a range of 6.28% to 6.33%. The yield could rise as New Delhi sells 300 billion rupees ($3.5 billion) of the benchmark on Friday. Focus will be on the potential for rate cuts after India's retail inflation slipped to a more than six-year low in June. An expected further drop to a record low in July is prompting calls for another rate cut. 'With recent high frequency data disappointing and indicating the possibility of growth in India slowing down further…it makes sense to be involved in local currency bonds also on the potential for more support from the RBI further down the line,' said Giulia Pellegrini, lead portfolio manager emerging market debt at AllianzGI. Market participants would also track whether the Reserve Bank of India turns more aggressive in withdrawing liquidity after drawing out 2 trillion rupees from the banking system on Friday.
Reuters
21-07-2025
- Business
- Reuters
Indian rupee to track dollar recovery, bond market focused on rate cut bets
MUMBAI, July 21 (Reuters) - The Indian rupee will likely take cues from how far the dollar's nascent recovery extends this week, while bonds will move based on expectations of interest rate cuts by the local central bank. The rupee closed at 86.1475 on Friday, down 0.4% on the week. It is expected to hover between 85.80 and 86.70 in the near-term with a slight weakening bias, according to traders. After falling for five straight months, the dollar index is up 1.5% in July so far, as strong U.S. economic data and indications that tariffs have started pushing up prices lowered rate-cut expectations in the world's largest economy. Remarks from Federal Reserve Chair Jerome Powell on Tuesday will be in focus, in light of the persistent criticism he has faced from U.S. President Donald Trump for not lowering interest rates. The odds of a U.S. rate cut in September are around 53%, per CME's FedWatch tool. India's ongoing trade negotiations with the U.S. will also be in focus alongside quarterly earnings reports from local companies, which have a bearing on foreign portfolio flows into equities. Forex advisory firm IFA Global recommended that importers cover near-term liabilities around 86, while suggesting exporters hedge around 86.25. Meanwhile, India's 10-year benchmark 6.33% 2035 bond yield , which settled last week at 6.3058%, is expected to move in a range of 6.28% to 6.33%. The yield could rise as New Delhi sells 300 billion rupees ($3.5 billion) of the benchmark on Friday. Focus will be on the potential for rate cuts after India's retail inflation slipped to a more than six-year low in June. An expected further drop to a record low in July is prompting calls for another rate cut. "With recent high frequency data disappointing and indicating the possibility of growth in India slowing down makes sense to be involved in local currency bonds also on the potential for more support from the RBI further down the line," said Giulia Pellegrini, lead portfolio manager emerging market debt at AllianzGI. Market participants would also track whether the Reserve Bank of India turns more aggressive in withdrawing liquidity after drawing out 2 trillion rupees from the banking system on Friday. KEY EVENTS: ** India July HSBC manufacturing, services and composite Flash PMI - July 24, Thursday (10:30 a.m. IST) U.S. ** June existing home sales - July 23, Wednesday (7:30 p.m. IST) ** Initial weekly jobless claims for week to July 14 - July 24, Thursday (6:00 p.m. IST) ** July S&P Global manufacturing, services and composite Flash PMI - July 24, Thursday (7:15 p.m. IST) ** June new home sales units - June 25, Wednesday (7:30 p.m. IST) ** June durable goods - June 26, Thursday (7:30 p.m. IST) ($1 = 86.1180 Indian rupees)
Economic Times
18-06-2025
- Business
- Economic Times
US dollar may stay strong vs EM currencies, but rupee's worst could be over
As of end-November 2024, the 40-currency trade-weighted Real Effective Exchange Rate (REER) stood at 108.13—the highest on record—indicating that the Rupee was significantly overvalued. ADVERTISEMENT By end-April, the REER had corrected to 100.80, suggesting the overvaluation had already been addressed. That's the latest available data, as per the RBI bulletin. However, since then, the Rupee has underperformed its Asian peers. It has been the worst performer—weakening 1.3% against the Dollar—while the offshore Yuan has appreciated 1.1% during the same period. Other Asian currencies have gained between 0.4% and 7%. Based on this trend, the current REER could be close to 98.5, the lowest since February 2019, implying the Rupee is now deeply correction appears to be deliberate. The RBI has tactfully used the period of Dollar weakness, allowing the Rupee to weaken subtly while other currencies appreciated against the though higher than under the previous regime, has remained under control. While the perception might be that the Rupee has been stable, it has actually weakened about 10% against a basket of peer currencies over the past seven months. The RBI has also significantly squared off its short forward book, which had swelled to $90 billion. ADVERTISEMENT The correction in the Rupee's overvaluation can be viewed as a third pillar of monetary easing. While repo rate and CRR cuts have been widely discussed, this form of loosening often goes a correction could support India's emerging manufacturing momentum. ADVERTISEMENT On the flip side, Cross/INR rates have surged to all-time highs—EURINR is approaching 100 and GBPINR has crossed have been advising clients to avoid raising ECBs in EUR, JPY, and CHF. These are alternative reserve currencies and tend to outperform during trade tensions or periods driven by U.S. tax cuts. Forward points have collapsed. ADVERTISEMENT The 5-year forward yield is at 2.7%—an attractive level for those looking to hedge long-term USD believe the Dollar may continue weakening against major currencies, although it could remain firm against Asian and EM currencies. That said, we expect the Rupee's underperformance to end soon. ADVERTISEMENT With the overvaluation largely corrected, the Rupee is likely to align with its peer group. We expect it to track the Yuan more closely going said, recent geopolitical tensions in the Middle East and the spike in crude oil prices pose near-term risks for the Rupee. However, we believe the RBI will act to prevent any one-sided, idiosyncratic the next 7–8 weeks, we expect the Rupee to trade in the 85–87 range, with a slight weakening bias. (The author is Founder and CEO IFA Global) (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times) (You can now subscribe to our ETMarkets WhatsApp channel) (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of
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Business Standard
13-06-2025
- Business
- Business Standard
Rupee weakens to 2-month low as crude surges on West Asia tensions
The rupee depreciated sharply against the US dollar on Friday, settling below the ₹86 per dollar mark—a two-month low since 9 April—amid a surge in crude oil prices triggered by escalating tensions in West Asia. The local currency weakened by 49 paise to settle at ₹86.09 per dollar, compared to the previous close of ₹85.60. During the day, the rupee fell as much as 0.65 per cent to touch ₹86.20 per dollar. The Reserve Bank of India (RBI) likely intervened in the foreign exchange market through dollar sales, which helped cap further losses, said dealers. 'The opening was expected to be weak due to geopolitical tensions,' said the treasury head at a private bank. 'RBI intervened; as a result, it briefly touched the 85.95 level. There was some mild inflow too,' he added. 'The Indian rupee weakened sharply today, breaching the ₹86/$ mark, driven by a sudden surge in crude oil prices and heightened geopolitical tensions following Israel's strikes on Iran. Brent crude jumped over 11% intraday, raising concerns over India's import bill, inflation outlook, and current account deficit,' IFA Global said in a note. Brent crude prices surged over 11 per cent to $78.50 per barrel, the highest in more than four months. The rupee was one of the worst-performing Asian currencies on the day, depreciating 0.57 per cent against the dollar. 'Near-term market attention will be directed towards geopolitical developments over the weekend and the impending monetary policy decisions by three major central banks next week,' said Dilip Parmar, Senior Research Analyst, HDFC Securities. In June so far, the rupee has been among the worst-performing Asian currencies, with a depreciation of 0.6 per cent. In the calendar year to date, the domestic currency has depreciated 0.5 per cent against the greenback, while in the financial year so far, it is down by 0.7 per cent. Meanwhile, India's foreign exchange reserves rose by $5.1 billion in the week ended 6 June, driven by a $3.4 billion increase in foreign currency assets, according to the latest RBI data. Total reserves stood at $697 billion, the highest since the week ended 4 October 2024, when reserves touched $701 billion. They had reached an all-time high of $705 billion in the last week of September 2024.
