Rupee Gains on US Jobs Data, but US Tariff Concerns Cap Rally
The Indian rupee failed to sustain its early gains against the US dollar due to tariff uncertainty, which has prompted foreign funds to sell off local assets
Mumbai: The Indian rupee strengthened 31 paise in early trade, briefly touching Rs 87.95 against the US dollar, supported by softer US jobs data that raised expectations of a Federal Reserve cut but gave up gains on concerns over potential US tariffs on Indian exports and order uncertainty restricting exporters to sell. Forex traders anticipate the rupee to remain under pressure on worries over US
tariffs on India and global uncertainty. Traders said that the central bank has been intervening to keep the currency above 88.30 in the last few days.
“The Indian rupee rose to 87.95 in the opening stages but could not sustain the gains despite a rise in Asian currencies and a fall in dollar index as tariff uncertainty has been taking toll of the currency making foreign funds to sell local assets. RBI interventions and geo-political events (particularly the second round of secondary tariffs on Russian oil buyers if implemented by Trump) will severely
impact the currency pair in the form of more outflows,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors.
At the interbank foreign exchange market, the rupee opened at 88 against the US dollar, then touched 87.95, registering a gain of 31 paise from its Friday’s close of 88.26. It eventually settled at 88.10 for the day, up 16 paise against its previous close of 88.26 against the dollar.
The rupee has depreciated sharply during August by one per cent, among the worst performing currencies in FYTD26 in the peer emerging markets even as the Dollar Index has softened by six per cent.
The no trade deal with the US and the imposition of Tariffs have played a role in rupee’s depreciation. FPI outflows continued from equity though debt flows were positive to the tune of $ 1.8 billion. RBI short USD position in FX Forwards was at $ 58 bn off almost $ 30 bn from its
peak. Money market yields also inched higher with the yields at the one-year segment going up 15 basis points.