The Indian rupee opened 6 paise higher against the US dollar on Wednesday, supported by a weaker greenback after softer US inflation data boosted expectations of an interest rate cut by the Federal Reserve. The local currency opened at 87.65 per dollar, compared with its previous close of 87.71.
The dollar index stood at 98.08, after declining nearly 0.5% on Tuesday. Against the yen, the dollar slipped 0.05% to 147.76, while the euro was steady at $1.1676, following a 0.5% gain in the prior session. The British pound inched up 0.03% to $1.3504.
The greenback weakened after US consumer prices rose 0.2% month-on-month in July, in line with expectations. The tame inflation reading lifted the probability of a September Fed rate cut to 94%, up from 86% a day earlier.
“The Indian rupee opened higher after the July US inflation data indicated limited impact of tariffs, providing room for the Fed to cut rates next month. Uncertainty over U.S. tariffs remains the dominant drag on sentiment, and the upcoming Trump-Putin summit is a key risk event that could sway the currency’s direction,” said Jigar Trivedi, Senior Research Analyst at Reliance Securities.
Meanwhile, US President Donald Trump and his Russian counterpart Vladimir Putin will meet this Friday in Alaska to hold discussions on halting the war in Ukraine.
“The upcoming Putin-Trump meeting takes on added significance for the rupee amid the recent escalation in US tariffs on India over its purchase of Russian oil. Any sign of a thaw between Washington and Moscow could open the door for tariff relief, offering the rupee breathing space,” Trivedi added.
India’s retail inflation fell to an eight-year low of 1.55% in July, slipping below the Reserve Bank of India’s target range of 2%-6%, driven by a decline in food prices.
“Amidst pressures, the RBI has reportedly stepped up its efforts to curb excessive rupee depreciation, selling at least $5 billion in both onshore and offshore markets this month. While these interventions have provided short-term relief, persistent headwinds, including escalated trade tensions from higher US tariffs, continue to leave the rupee vulnerable and depreciation risks alive,” said Amit Pabari, MD, CR Forex Advisors.
Rupee Outlook
The rupee is trading within a narrow range of 87.50 to 87.70.
According to Pabari, a decisive break above or below this range will likely determine its next direction, largely influenced by capital inflows into the Indian market amid expectations of a US rate cut.
Trivedi expects the USDINR to weaken to 87.00, and on the flip side 87.80 is seen at resistance.
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