A strong rise in the dollar index, especially after the US-EU trade deal, dragged the rupee lower.
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The Indian rupee has been under pressure since the beginning of this month. The domestic currency has declined about 0.5 per cent in the last one week. This fall has taken it below a key support level of 86.50. The rupee touched a low of 86.92 on Tuesday against the dollar, before closing at 86.82.
A strong rise in the dollar index, especially after the US-EU trade deal, dragged the rupee lower. Strong foreign money outflows from the Indian equity segments is also weighing on the rupee. The Indian equity segment has seen a net outflow of about $1.6 billion so far this month.
Fed meeting
The US Federal Reserve meeting outcome on Wednesday will be important to watch. The Central bank is expected to keep the rates unchanged, in the 4.25-4.5 per cent range. Market will be closely watching for any hint on the future policy decision on the back of the tariff impact. That will be very important in setting the trend for the dollar going forward.
Dollar outlook
The dollar index (99) has risen well above an intermediate resistance level of 99.70. The region between 99.70 and 99.50 will be a good support zone now. The outlook is bullish. The dollar index can rise to 99.85-100 in the coming days. This can continue to keep the rupee under pressure.
The price action after the rise to 100 on the dollar index will need a close watch. Failure to breach the psychological 100 mark can drag the dollar index down to 99 again.
Rupee outlook
The trend is down for the rupee. There is some more room to fall from here. A crucial support is in the 87-87.05 region, which can be tested in a week. The price action thereafter is going to be very important.
If this 87-87.05 support zone holds, then there are good chances for the rupee to recover towards 86.60-86.50.
On the other hand, if the rupee declines below 87.05 decisively, the downside pressure can increase. In that case, the rupee can fall to 87.50.
As such the price action in the 87-87.50 will need a very close watch.
Published on July 29, 2025
