Rupee Weakens Near 87.50 on Global Headwinds

The Indian rupee fell on Thursday, closing at ₹87.4550 against the U.S. dollar. It briefly touched ₹87.4850, approaching a key psychological barrier. Traders blamed two main risks: Fed Chair Jerome Powell’s upcoming speech and reports of possible U.S. tariffs on Indian goods.

This marks the third straight session of rupee weakness. As Powell’s Jackson Hole address nears, uncertainty is rising across emerging markets.

 U.S. Tariff Threats Spark Risk-Off Sentiment

Concerns grew after reports suggested that the U.S. may impose 50% tariffs on select Indian exports. Affected sectors could include pharmaceuticals, automobile parts, and steel. The White House has yet to confirm details, but traders fear the impact on trade flows and dollar inflows.

“Markets move quickly on tariff risks,” said Pranav Iyer, currency strategist at ForexFlash Mumbai. “The rupee reacts strongly to anything that threatens export competitiveness.”

Fears of lower export revenue and foreign investment drove up demand for the U.S. dollar, hurting the rupee in the process.

 Powell’s Speech: Caution or Commitment?

Global traders are watching closely as Powell prepares to speak at the Jackson Hole Symposium. Despite inflation cooling in recent months, the Fed has warned that the battle isn’t over. Wage growth and services inflation remain sticky.

Markets currently price in an 80% chance of a September rate cut, but analysts warn that Powell may offer no clear commitment. In a note, Goldman Sachs said Powell is likely to adopt a cautious tone due to uneven data trends.

This uncertainty has boosted the U.S. dollar index (DXY) to 98.67, increasing pressure on emerging market currencies like the rupee.

 RBI’s Strategy: Smooth Volatility, Avoid Panic

The Reserve Bank of India (RBI) acted quietly to manage volatility. According to dealers, it sold small dollar amounts near ₹87.50 but avoided aggressive intervention.

Rather than defending a fixed level, the RBI aims to prevent sharp swings. India’s $648.5 billion in foreign exchange reserves gives it room to act if needed. However, RBI is expected to remain hands-off unless volatility spikes sharply.

 Domestic Indicators Remain Resilient

Despite currency pressure, other key Indian financial indicators stayed stable:

• 10-year government bond yield: 7.08%

• Foreign institutional investor flows: Net sellers in equities (₹1,226 crore), but buyers in bonds

• Crude oil price: $82.45 per barrel, no inflation shock

• Stock markets: Mild losses, Sensex down 0.6%

Domestic markets showed resilience, supported by strong fundamentals and foreign debt inflows. For now, investors are watching global cues more than local factors.

 Technical View: USD/INR in Bullish Zone

The USD/INR pair has broken key resistance at ₹87.30. Price now trades within a short-term bullish channel. Technical indicators suggest further upside, though momentum may slow.

• Immediate support: ₹87.20

• Resistance levels: ₹87.80 and ₹88.00

• 200-day moving average: ₹86.15

If Powell strikes a dovish tone, the rupee may recover toward ₹87.20. A hawkish message, or confirmation of tariffs, could drive USD/INR past ₹88.00.

 Global Currency Markets Reflect Volatility

The rupee was not alone in weakening. Other Asian currencies also fell as the dollar gained strength:

• South Korean won: Down 0.7%

• Thai baht: Down 0.4%

• Philippine peso: Fell to a six-month low

The dollar’s rally reflects global fears that the Fed may delay easing. Risk appetite remains fragile as the Jackson Hole event draws near.

 Conclusion

The Indian rupee’s fall to ₹87.4550 highlights the growing pressure on emerging market currencies. Trade tension and Fed uncertainty are shaking currency markets globally.

Powell’s speech on Friday could decide the rupee’s short-term direction. If he avoids committing to a rate cut, the dollar may strengthen further — pulling the rupee closer to ₹88.00. But if he signals easing, we could see a reversal.

With strong reserves and stable domestic data, India remains in a better position than many peers. Still, global sentiment will lead the next major move in USD/INR.