Rupee Ends Weaker Against US Dollar
The Rupee is expected to find immediate support near 85.00-85.20 levels and could gradually move towards 85.90-86.00 levels in the near term.
The Indian rupee was weaker by 20 paise to close at 85.59 against the US dollar on Tuesday in comparison to its previous close of 85.39 on Monday. This significant depreciation comes amid various global and domestic economic factors influencing the currency markets.
The domestic currency opened 13 paise weaker at 85.52 against the US dollar.
The rupee is expected to find immediate support near 85.00-85.20 levels and could gradually move towards 85.90-86.00 levels in the near term.
It had appreciated to 85.39 against dollar, but the recovery was stalled on the back of FII outflows combined with firmer crude oil prices. Adding to the woes, India’s HSBC Manufacturing PMI slipped to a three-month low of 57.6, dragged down by rising prices and weak export orders.
However, RBI’s forex reserves swelled by $6.99 billion to $692.72 billion, giving it ample power to curb excessive rupee volatility. Yet, with the central bank absorbing inflows aggressively, the rupee’s upside potential may remain capped in the near term, added Amit Pabari.
Additionally, the US dollar extended its decline for the second day as the dollar index fell to 98.70 levels as ISM Manufacturing Imports Index crashed to 39.9 in May — a level not seen since 2009. Alongside, the Manufacturing PMI slipped further into contraction at 48.5, revealing a toxic mix of weak demand, falling output, and rising cost pressures.
"The Trump administration’s renewed protectionist stance, unpredictable tariff threats, and tax policies that have rattled institutional investors. This caused a broad-based selloff in U.S. equities and debt, pulling capital out of the dollar and shifting into safer or higher-yielding assets globally," said Amit Pabari, managing director at CR Forex Advisors.
Pabari expected the index to be under pressure and face strong resistance near the 99.80-100 zone and gradually decline.
On Tuesday, crude rose for a second day with Brent crude – the global benchmark for crude oil – rising 0.68% to $65.07 per barrel as dollar fell to its lowest since 2023 boosting the appeal of commodities. Crude was up as much as 5% on Monday as OPEC+ boosted supply in line with market expectations.
"All eyes will be on the RBI’s MPC meeting where a 25-bps rate cut is expected this week as part of its pro-growth strategy, which could cap any strong appreciation in the near term. A dovish RBI, in the face of global tightening concerns, is likely to keep the rupee under pressure," said Pabari.
