The Indian rupee closed 17 paise down at 87.6 per dollar on Thursday, another off-session as trade tension between India and the US is worsening and crude oil prices are on the rise globally. The currency, which was trading at 87.69 at the outset of the day, was on the receiving end of the day as the market mood turned wary after the announcement of a 25 per cent tariff on Indian exports by U.S President Donald Trump. Fears of additional trade sanctions have been imminent, such as possible penalties on imports of Russian oil and weapons against the rupee, which do not help its falling stock.
The rupee traded within a small range of 87.25 to 88 throughout the session as it failed to set up any support against the continuous outflow of foreign funds and increasing geopolitical uncertainty. In July, there was notable weakness of rupee by 2.15 percent against the U.S dollar which is its most dramatic monthly depreciation since September 2022 and a third successive month of losses.
This frailty lasted even with a slight pullback in the U.S. dollar index, which declined to 99.77 and remained near its 2-month high thanks to strong economic data in the U.S. and a hawkish interest-rate policy from the Federal Reserve. The high dollar condition has also placed increased pressure on the emerging market currencies, such as the rupee.
Currency specialists reckon that the Reserve Bank of India (RBI) can always interfere to ensure unnecessary volatility does not occur in case the rupee nears the psychologically important 88-percent-speed dollar mark. The key focus of market participants is to monitor any interventions and trade negotiations between India and the U.S., which would define the currency movement in the short run. The increase in crude oil prices is also a major threatening factor, which may put greater pressure on the current account deficit of India and strain the rupee during the next few weeks.
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