Rupee Slumps Against Greenback On Dollar Demand, Cross Border Tension

The Indian rupee slumped against the US dollar in Friday's session on persistent dollar demands from importers for their month-end payment obligations and as cross-border tensions rose between India and Pakistan.

Rupee weakened 39 paise to 85.66 against US dollar so far today. The domestic currency opened 8 paise stronger at 85.19 against the US dollar today, compared to its closing rate of 85.27 per dollar on Thursday, which was higher against US dollar.

The anticipated trading range for the day is between 85.00 and 85.50, noted Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

He advised exporters to wait before selling and suggested that importers hedge their payables around the 85.00 level when possible.

Meanwhile, as second round of tariff talks are soon to kickstart between Japan and US, Tokyo's CPI inflation surged to a two-year high, reaching 3.5% year-on-year from the previous month's 2.9%, keeping the Bank of Japan in focus for a potential rate hike, Bhansali noted.

Asian markets climbed as Wall Street investors assessed the trade climate. Wall Street gained for a third consecutive day, with all indices up as the US softened its tariff rhetoric.

On Thursday, the Indian rupee strengthened from 86.68 to 86.26, supported by inflows from FPIs who bought shares worth Rs 8,000 crore and a corporate entity that maintained the rupee's strength throughout the day, Bhansali said.

The US trade secretary's rhetoric that India could be the first to sign a trade tariff treaty with the country also bolstered the rupee, he added. Exporters are advised to wait for better hedging opportunities, while importers can consider near-term buying of dollars around the 85.00 level to hedge their imports. Close monitoring of the RBI's dollar-buying activities near the 85.00 level is recommended, Bhansali said.