Summary:
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Rupee seen opening slightly firmer after dollar pullback
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Importer hedging and weak inflows driving pressure
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US–India trade rhetoric adds downside risk
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RBI intervention expected to smooth volatility
Earlier:
The Indian rupee may see limited near-term relief on Tuesday after a pullback in the US dollar and a modest decline in US Treasury yields, though traders warn that persistent demand–supply imbalances continue to weigh on the currency.
The one-month non-deliverable forward market suggests the rupee is set to open around 90.20–90.24 per dollar, after closing at 90.2775 on Monday (via Reuters). That comes after four consecutive sessions of losses, with the currency down more than 1% over just over two weeks.
The rupee’s recent weakness has been driven largely by importer hedging flows early in the year, combined with subdued foreign equity inflows. Bankers say these structural pressures have overwhelmed intermittent support from the central bank and left the currency vulnerable to further depreciation.
Adding to the pressure has been negative newsflow around US–India trade relations. Over the weekend, Donald Trump said Washington could raise tariffs on India if New Delhi fails to meet US demands to curb purchases of Russian oil. That rhetoric has injected a fresh geopolitical risk premium into the rupee at a time when positioning is already stretched.
The Reserve Bank of India has been an active presence during recent bouts of rupee weakness. After initially defending the 90 handle, the central bank appears to have stepped back as dollar demand proved persistent, suggesting a preference for smoothing volatility rather than drawing a firm line in the sand.
Some near-term support could come from external factors. The dollar index has eased from a near four-week high as investors await a heavy slate of US economic data for signals on the policy outlook at the Federal Reserve. Markets are currently pricing in two Fed rate cuts this year.
