Currency watch: Rupee drops 48 paise to 87.66 against dollar; FII outflows, tariff worries drag
The rupee plunged 48 paise to close at 87.66 against the US dollar on Monday, weighed down by persistent foreign fund outflows, global trade concerns, and rising dollar demand from oil importers.
The Indian currency opened at 87.21 and touched an intraday low of 87.73 at the interbank foreign exchange market before settling 48 paise lower from its previous close of 87.18. On Friday, the rupee had staged a sharp rebound of 47 paise, PTI reported.
Forex traders attributed the pressure to renewed fears over a wider trade disruption after US President Donald Trump's tariff measures resurfaced. Demand from oil marketing companies also added to the rupee's weakness.
'We expect the rupee to remain weak amid uncertainty over the India-US trade deal and foreign institutional investor (FII) outflows,' said Anuj Choudhary, Research Analyst, commodities and currencies, Mirae Asset Sharekhan. 'However, weakness in the US dollar amid chatter over rate cut expectations in the US due to weak economic data may support the rupee at lower levels,' he added.
Choudhary expects the USD-INR pair to trade in a range of 87.40 to 88.
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Traders are now eyeing factory order data from the US and the Reserve Bank of India's upcoming monetary policy.
The six-member Monetary Policy Committee (MPC), chaired by RBI Governor Sanjay Malhotra, began its three-day meeting on Monday. The outcome of the rate decision will be announced on Wednesday.
Brent crude futures fell 1.06% to $68.93 per barrel as OPEC+ confirmed a production hike from September, while softening demand expectations in the US and tariff risks also weighed.
The US dollar index, which measures the greenback's strength against six major currencies, was down 0.37% at 98.77.
Dilip Parmar, Senior Research Analyst at HDFC Securities, said the rupee's fall was also driven by foreign fund withdrawals and liquidity adjustments linked to a maturing $5 billion forex swap conducted by the RBI. "The forward premium rates also jumped to reflect the potential interest rate differential between the US and India after Friday's jobs data," he noted.
US non-farm payroll data showed the economy added just 74,000 jobs in July, well below expectations of 106,000. The June figure was sharply revised to 14,000 from the earlier estimate of 147,000 — increasing pressure on the Federal Reserve to cut interest rates.
Despite the currency weakness, Indian equities ended higher. The BSE Sensex gained 418.81 points to close at 81,018.72, while the Nifty climbed 157.40 points to 24,722.75.
FIIs remained net sellers, pulling out Rs 2,566.51 crore from domestic equities on Monday, as per exchange data.
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