The rupee depreciated 61 paise on Wednesday, recording its biggest single-day fall in nearly three months, on higher month-end demand for dollar and aggressive selling by foreign portfolio investors (FPIs).
The domestic currency ended at 87.43 against the US dollar, after opening at 87.12, down 30 paise compared to the previous close of 86.82.
The currency also weakened following comments from US President Donald Trump which suggested that India could face tariffs ranging from 20-25 per cent, analysts said.
Later in the day, after Indian market hours, Trump announced on social media platform Truth Social that India would face a tariff of 25 per cent, effective August 1, as well an unspecified penalty for importing energy and defence goods from Russia.
Intraday, the currency touched a high of 87.0663 and a low of 87.5125. The fall in the rupee on Wednesday was the sharpest single-day fall since May 8 when it had tumbled 89 paise to 85.72. In the last 11 trading sessions, the rupee has depreciated by 161 paise, or close to 2 per cent, amid uncertainties related to US tariffs.
“The Indian rupee exhibited its most significant single-day decline since May 8, reaching a five-month low. This sharp depreciation was primarily driven by increased month-end dollar demand and outflows from foreign funds,” said Dilip Parmar, senior research analyst, HDFC Securities.
In the past one week, FPIs have sold Rs 16,370 crore of domestic shares, exerting pressure on the rupee as foreign investors continued to buy dollars and offload the local currency.
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Analysts also attributed the sharp decline in the rupee to the Reserve Bank of India’s (RBI) absence in the forex market on Wednesday. RBI has always maintained that its intervention in the rupee market is only to contain volatility in the exchange rate, and not to target specific level.
Once the rupee breached the psychological level of 86.9, it triggered higher demand for dollars from importers, including from oil companies, and triggered short covering. “Rupee traded weak, breaching the 87.4 mark with a decline of 0.72 per cent, as rising crude prices and a stronger dollar index weighed on sentiment,” said Jateen Trivedi, VP research analyst – commodity and currency, LKP Securities.
Market participants also remained cautious ahead of the US Federal Reserve’s policy announcement later in the day on Wednesday.
Following the substantial rally in the rupee since the start of this month, the immediate support level for spot USD/INR has shifted to 87, while the resistance is now seen at 87.70, Parmar said. Analysts expect the rupee to trade in a broader range of 87–87.70. Once it breaks 87 level, the next resistance for the local currency will be 88, forex market analysts said.
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