Rupee Slips In First Week Of 2025 As Dollar Continues To Gain Strength

The Indian rupee weakened by two paise to close at 85.78 against the US dollar, after opening five paise weaker at 85.80 against the greenback on Friday.

This marked the ninth consecutive week of decline for the local currency. It had closed the preceding week, ended Dec. 27, at 85.75 against its American counterpart.

On Thursday, the rupee weakened by 10 paise to 85.75 after a weak start, following a 4-paise decline to 85.65 in the first trading session of 2025. On the last day of 2024, it had fallen by 7 paise to close at 85.61.

This ongoing weakness underscores the challenges faced by the rupee amid the strengthening of the dollar following Donald Trump's decisive win in the US presidential elections in November. The President-elect will take charge of the White House this month.

The Indian currency is expected to remain under pressure due to persistent dollar demand, said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors. Exporters may hold off on selling the rupee with a stop loss at 85.50, while importers are advised to buy on dips, he added.

Bhansali also highlighted that the Reserve Bank of India sold $1 billion to curb further rupee depreciation, particularly around the 85.78 level. He emphasised that the rupee, compared to global peers, is overvalued, contributing to its daily weakening.

The dollar has been bolstered by expectations of fewer rate cuts and an outlook that the US economy will outperform its global counterparts.

The dollar index —an gauge to measure the greenback against a basket of other popular currencies— reached a high of 109.55 before retreating to 109.20 due to profit booking, with US 10-year yields holding steady at 4.5670%, Bhansali noted.