The Indian rupee fell to a two-week low against the U.S. dollar, driven by corporate dollar demand and equity outflows amid uncertainties over U.S. trade policies.
The Indian rupee weakened past the 86 per U.S. dollar mark on Monday, reaching its lowest level in over two weeks. This decline is attributed to significant corporate dollar demand and equity-related outflows, traders reported, coinciding with uncertainties surrounding U.S. trade policies.
The rupee closed at 85.9850 against the U.S. dollar, marking a 0.2% decrease from its previous close at 85.80 on Friday. Earlier in the session, the currency dipped to 86.0475, its weakest point since June 25. Traders pointed to dollar demand from a major Indian conglomerate and other companies, alongside anticipated outflows from Indian equities, as key factors exerting pressure on the rupee.
India’s benchmark equity indices, the BSE Sensex and Nifty 50, both experienced a 0.3% decline, contrasting with the positive movements seen across most regional equities.
Meanwhile, European stocks also suffered losses, and the euro showed slight weakness against the dollar following U.S. President Donald Trump’s weekend threat to impose a 30% tariff on imports from the region, exacerbating the ongoing trade conflict.
In the U.S., equity futures were similarly affected, with the S&P 500 futures dropping by 0.3%. Analysts from ING suggested that these moves have not been more substantial because investors view these threats as a negotiation tactic by Washington to coax a deal from the other side.
India remains among the few major U.S. trading partners yet to receive a tariff notice. Further negotiations between Indian and U.S. officials are anticipated, focusing on areas of contention such as auto components, steel, and agricultural products.
Amit Pabari, managing director at FX advisory firm CR Forex, commented on the situation, noting that prospects for the rupee to strengthen are limited. He expects resistance for the rupee around the 85.40-85.50 levels.
Attention is now directed toward India’s consumer inflation data, expected later in the day. A Reuters poll of 50 economists suggests that inflation figures, buoyed by moderate food prices and a high base effect, have likely eased to a six-year low of 2.50% in June.