29 Aug 2025 : The Indian rupee depreciated by 18 paise to 87.76 against the U.S. dollar in early trade on Thursday, weighed down by a stronger American currency and persistent foreign fund outflows.
Weak Opening in Currency Markets
At the interbank foreign exchange market, the rupee opened weaker at 87.72 per dollar and soon slipped to 87.76, marking a 0.21% decline compared to the previous close of 87.58. The fall comes amid renewed concerns over global risk sentiment and volatile crude oil prices.
Factors Behind the Decline
Currency traders attributed the rupee’s weakness to:
- Dollar Strength – The U.S. dollar index, which measures the greenback against six major currencies, was trading higher as investors preferred safe-haven assets following uncertainty over U.S.-China trade relations and the Federal Reserve’s policy outlook.
- Rising Crude Oil Prices – Brent crude hovered around $84 per barrel, putting pressure on India’s import bill and widening the trade deficit, a key factor that weakens the rupee.
- Foreign Capital Outflows – Continued selling by foreign institutional investors (FIIs) in domestic equities added to the currency’s downward pressure. On Wednesday, FIIs were net sellers worth over ₹2,100 crore, according to exchange data.
Domestic Equity Market Impact
Indian stock markets also opened on a weak note, mirroring global trends. The BSE Sensex slipped nearly 300 points in early trade, while the NSE Nifty was down by over 90 points, further weighing on investor sentiment.
Analysts noted that the rupee’s fall was partly linked to equity market outflows, as investors sought safety in U.S. assets amid uncertain macroeconomic conditions.
RBI Intervention Expected
Market experts said the Reserve Bank of India (RBI) may intervene in the foreign exchange market to curb excessive volatility. The RBI has previously sold dollars from its reserves to prevent sharp depreciation of the rupee.
“While the rupee is under pressure due to global headwinds, RBI intervention is likely if levels cross beyond 88 per dollar. Stability remains the central bank’s key priority,” said a senior forex dealer at a private bank.
Global Economic Uncertainty
The rupee’s weakness also reflects broader global economic concerns. Markets are awaiting key U.S. economic data and any fresh statements from Federal Reserve officials on interest rate cuts. Meanwhile, geopolitical tensions in the Middle East have added another layer of uncertainty for oil-importing countries like India.
Outlook Ahead
Experts believe the rupee could remain range-bound between 87.50 and 88.20 in the near term, depending on crude price movements, foreign capital flows, and global risk appetite.
For importers, especially in the energy and electronics sectors, the current depreciation is expected to increase costs, while exporters in IT and textiles may benefit from higher realizations.
Summary
The rupee slipped 18 paise to 87.76 against the U.S. dollar in early trade, pressured by strong dollar demand, rising crude prices, and foreign fund outflo