The rupee briefly gained in early trade on Tuesday (September 9), touching 87.94–87.93 against the US dollar, after the greenback slipped on expectations of a Federal Reserve rate cut. Hopes of foreign portfolio flows into Indian bonds, following political changes in Indonesia, also supported sentiment.
But the recovery quickly lost steam as state-owned banks stepped in to buy dollars on behalf of oil companies and other importers.
Traders said such dollar demand has been a recurring factor weighing on the rupee whenever it shows signs of strengthening.
This pattern explains why the rupee has underperformed most Asian peers this year.
The dollar index has dropped 10% in 2025 — from 106 to 96 — as weaker US economic data has kept the Fed on track for monetary easing. Currencies like the Thai baht and Korean won have gained about 7%, the yen 6%, and the Chinese yuan 2.5–3%. In contrast, the rupee has fallen around 2.5% against the dollar, making it Asia’s weakest currency.
Analysts point to persistent trade deficits, heavy importer dollar demand, and cautious foreign investor sentiment as key reasons behind this underperformance.
While the Reserve Bank of India is seen intervening to limit sharp depreciation, the rupee’s scope for recovery remains capped.
For now, market watchers expect the currency to trade in a narrow band of 87.90–88.30, with a possible test of 87.50 if global trade concerns ease.
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