The US dollar index fell sharply to a multi-month low of 96.61. Concerns grew over the Federal Reserve’s independence amid reports that President Donald Trump is considering replacing Fed Chair Jerome Powell.
This political interference spooked global investors and triggered selling pressure on the greenback.
Amit Pabari, MD at CR Forex Advisors, noted, “The dollar index plunged as Trump’s influence on Fed policy unnerved investors. Dollar-rupee may find support near 85.20–85.40, but a rebound toward 86–86.50 remains likely due to weak local data and global uncertainty.”
Brent crude futures fell 0.5% to $66.40 per barrel. Softer oil prices reduce India’s import costs and help tame inflation, lending support to the rupee.
Offshore non-deliverable forwards (NDFs) indicated an open between 85.64 and 85.68, compared to 85.7550 previously. Onshore forward premiums stood at 11 paise.
However, the rupee lagged other Asian currencies in June. While regional peers appreciated by 4% to 12%, the Indian unit slipped slightly, reflecting continued pressure from equity outflows and macro headwinds.
However, currency traders flagged persistent dollar demand from importers and foreign banks. A private bank trader said, “The rupee struggled to hold below 85.50. Importer demand remains, and yesterday’s reversal from 85.30 reflects that pressure.”
In the offshore market, the one-month non-deliverable forward indicated an open between 85.64 and 85.68, compared to 85.7550 in the previous session. Onshore forward premiums were at 11 paise.
On the macro front, India’s industrial output in May slowed to a nine-month low of 1.2% due to the early monsoon affecting manufacturing and power sectors. Meanwhile, the fiscal deficit stood at just 0.8% of the FY25 target, supported by the ₹2.69 lakh crore dividend from the RBI.
–With inputs from PTI and Reuters
