The rupee edged lower in early trade on Wednesday, slipping 6 paise to 87.69 against the US dollar. Forex traders pointed to lingering depreciation pressures and persistent foreign fund outflows as key factors behind the slide. Despite a marginal decline, the currency remained range-bound, thanks to the Reserve Bank of India’s efforts to stabilize the exchange rate.
The rupee opened at 87.63 in the interbank foreign exchange market before touching an intra-day low of 87.69. This marks a slight dip from Tuesday’s close of 87.63, where it had gained 12 paise. In initial trade, it briefly rose to 87.61 against the greenback, but the gains were short-lived.
Market sentiment has been influenced by shifting expectations around US monetary policy. Following the latest US Consumer Price Index (CPI) data, traders are now pricing in a 90% chance of a Federal Reserve rate cut on September 17, up from 82% earlier. Amit Pabari, MD of CR Forex Advisors, noted that this anticipation has weakened the dollar index, which fell 0.08% to 98.01.
Global oil prices also played a role. Brent crude, the benchmark for international oil, inched up 0.09% to $66.18 per barrel. Meanwhile, on the domestic front, India’s retail inflation for July dropped sharply to 1.55%, the lowest level since June 2017. This has fueled speculation that the RBI may introduce further interest rate cuts this year, potentially adding downward pressure on the rupee.
The RBI’s interventions have been notable. Reports suggest the central bank has sold at least $5 billion in onshore and offshore markets this month to curb excessive rupee depreciation. While these measures have provided temporary stability, challenges remain. Escalating US-China trade tensions and higher US tariffs continue to weigh on the rupee, keeping depreciation risks alive.
Despite the currency’s struggles, domestic equity markets showed positive momentum. The Sensex surged 327.79 points to 80,563.38, while the Nifty climbed 112.15 points to 24,599.55. However, Foreign Institutional Investors (FIIs) remained cautious, offloading equities worth Rs 3,398.80 crore on Tuesday.
With multiple factors at play—foreign outflows, RBI interventions, and shifting Fed rate expectations—the rupee’s near-term trajectory remains uncertain. Traders will be closely watching global economic signals and domestic policy moves for clearer direction.