The rupee ended its three-day winning streak and closed 6 paise lower at 87.12 (provisional) against the US dollar on Thursday, as concerns regarding trade tariffs and consistent outflows of foreign funds persisted.
Forex traders noted that investors were cautious, awaiting the release of the weekly unemployment claims data from the US and the European Central Bank’s monetary policy announcement.
Despite a positive equity market, the weakening of the American currency in the global market and a decline in crude oil prices helped limit the losses for the rupee.
The local currency initially gained ground following the US decision to postpone higher tariffs on imports from Canada and Mexico, as well as the Reserve Bank of India’s decision to inject ₹1.9 trillion liquidity into the banking system.
Opening at 86.96, the rupee reached a high of 86.88 against the US dollar before turning volatile and hitting a low of 87.16. It finally settled at 87.12 (provisional) against the dollar, marking a 6 paise decrease from its previous close.
On Wednesday, the rupee had strengthened by 13 paise to close at 87.06 against the US dollar, continuing its upward trend for the third consecutive day.
Analysts at Mirae Asset Sharekhan, including Anuj Choudhary, highlighted that the rupee retreated due to selling pressure from Foreign Institutional Investors (FIIs), although the US dollar weakened to a four-month low following the US decision to delay implementing higher tariffs on imports from Canada and Mexico.
Choudhary anticipated a slightly positive bias for the rupee on account of favorable domestic market conditions and a weakened US dollar. However, the outflows from FIIs may restrict significant gains for the local currency.
He mentioned that uncertainty surrounding trade tariffs may weigh on the rupee, with traders likely to monitor the US weekly unemployment claims data and the ECB’s monetary policy decision. The USD-INR spot price was expected to trade within the range of 86.80 to 87.25.
In the global market, the dollar index, which measures the greenback’s strength against a basket of six currencies, was trading 0.15 per cent lower at 104.12.
Although Brent crude, the global oil benchmark, saw a 0.39 per cent increase, it remained at six-month low levels of $69.57 per barrel in futures trading.
In the domestic stock market, the 30-share BSE Sensex surged by 609.86 points or 0.83 per cent to close at 74,340.09, while the Nifty advanced by 207.40 points or 0.93 per cent to settle at 22,544.70 points. Both indices had recorded gains of over 1 per cent in the previous session.
On Wednesday, Foreign institutional investors (FIIs) offloaded equities worth ₹2,895.04 crore on a net basis, as per exchange data.
The Reserve Bank had announced that it would undertake open market purchases of government securities and USD/INR swaps totaling around ₹1.9 lakh crore during the month.
Meanwhile, US President Donald Trump granted a one-month exemption on his new tariffs on imports from Mexico and Canada for US automakers, following concerns about the potential impact of the trade war on domestic manufacturing. The decision came after Trump held discussions with the leaders of major automakers Ford, General Motors, and Stellantis.
