MUMBAI– The Indian rupee opened stronger at 87.22 against the U.S. dollar on Monday, recovering slightly after a volatile week marked by continued foreign institutional investor (FII) selling and the announcement of 25% U.S. tariffs on Indian exports by President Donald Trump.
The rupee’s uptick was supported by a decline in the dollar index and gains in other Asian currencies. It opened 32 paise higher from Friday’s close of 87.54.
Last week, the rupee had slumped to a low of 87.73 and closed at 87.52 on August 1, down from 86.52 on July 25—losing a full rupee over the period as the dollar index approached the 100 mark.
The weakness was primarily driven by sustained FII outflows and rising global oil prices. Foreign investors sold Indian equities for the fifth consecutive week, with July’s total FII outflow reaching ₹47,666 crore.
Currency traders expect the rupee to trade between 87.00 and 87.50 during the day and between 87.00 and 87.80 for the week, with the Reserve Bank of India (RBI) likely to intervene to prevent excessive volatility.
The rupee remains under pressure due to uncertainty surrounding steep U.S. tariffs and anticipation ahead of the RBI’s policy decision scheduled for August 6.
Meanwhile, the likelihood of a U.S. Federal Reserve rate cut in September rose to 80% after weaker-than-expected July employment data. The U.S. economy added fewer jobs than projected, and the unemployment rate climbed to 4.2%. As a result, the dollar index fell 1.35% on Friday—its worst single-day drop since mid-April.
On the commodities front, Brent crude oil prices declined to $69.54 per barrel as OPEC+ agreed to increase output in September. Concerns over a cooling U.S. economy and ongoing tariff tensions also weighed on prices.
India’s 10-year benchmark bond yield (6.33% 2035) closed at 6.368% last week, up 2 basis points. Traders expect the yield to remain in the 6.33%–6.38% range until the RBI policy announcement. While some market participants anticipate a 25-basis-point rate cut, HSBC Research expects the RBI to hold rates steady.
Adding to rate-cut hopes, India’s retail inflation fell to a six-year low in June, with projections suggesting a record low in July as well. (Source: IANS)
