Mumbai
The Indian rupee ended its four-day gaining streak on Thursday, depreciating by approximately 31 paise to close at 88.1275 per US dollar (USD), compared to the previous close of 87.8150. This dip followed a strengthening of the dollar after the US Federal Reserve (Fed) initiated its rate cut cycle with a 25 basis points reduction.
During the prior four trading sessions leading up to September 17, the rupee had appreciated a total of 63 paise, buoyed by optimism regarding the Fed’s potential return to a rate-cutting trajectory and positive sentiment surrounding ongoing trade tariff negotiations between India and the US.
Anindya Banerjee, Head of Currency & Commodity Research at Kotak Securities, noted that since the Fed meeting, the US Dollar Index has remained relatively stable, yet the USDINR exchange rate climbed above 88. “Trade uncertainty remains a significant concern,” he stated. “Until a trade agreement with the US is finalized, the rupee is likely to face pressure from Foreign Portfolio Investment outflows and speculative selling.”
Banerjee added that the rupee appears undervalued compared to its emerging market peers. He forecasted that following the signing of a trade deal, a potential appreciation could occur. In the short term, he anticipates the USDINR will consolidate within a range of 87.70 to 88.70.
Dilip Parmar, Senior Research Analyst at HDFC Securities, commented that the rupee mirrored the weakness observed in regional currencies as the dollar rebounded sharply post-Fed rate cut. He highlighted that, despite a weaker dollar against other major currencies, the trend for the rupee remains soft. “Currently, its depreciation serves as a stabilizer for growth rather than hindering rate reductions,” Parmar stated. He projected support for the spot USDINR at 87.65 and resistance at 88.40.
Bond Yields Rise
The yield on the 10-year benchmark Government Security (6.33 percent GS 2035) rose by approximately 4 basis points to close at 6.51 percent, up from a previous close of 6.47 percent. This increase in yield followed a rise in US Treasury yields, despite the Fed cutting the federal funds rate to 4.00-4.25 percent to bolster the labor market, according to a report from Nuvama Wealth.
The report noted that while system liquidity remains in surplus, it has decreased to ₹63,745 crore, marking the lowest level in five months, attributed to unexpectedly high advance tax payouts.
VRR Auction
In other news, the Reserve Bank of India (RBI) is set to conduct a six-day variable rate repo (VRR) auction totaling ₹1 lakh crore on Friday, as the surplus liquidity in the banking system has diminished to ₹63,745 crore as of September 17.
During the overnight VRR auction held on Thursday, aimed at injecting ₹25,000 crore into the banking system, the RBI received bids totaling ₹45,783 crore and accepted ₹25,006 crore at a weighted average rate of 5.52 percent.
Published on September 18, 2025
