Rupee appreciates by 15 paise against the dollar to close at Rs 87.73 / dollar

Mumbai, August 6, 2025 — There was some respite for the Indian rupee as it recovered from its all-time low and closed 15 paise stronger at ₹87.73 per US dollar. This, after the RBI kept its benchmark interest rate unchanged. The RBI chose not to cut down interest rate probably because it did not want to put Indian currency under further risk of significant depreciation. When the interest rate of a country goes down vis-a-vis that of other countries, its currency may depreciate. Because the US Federal Reserve chose not to cut interest rate in its meeting earlier this week, the RBI also did the same.

Impact on Investors and Broader Market

For investors, this adds pressure on FII sentiment and raises risks for import-heavy sectors. Export-oriented businesses, however, may benefit from improved competitiveness but for the short term as the threat of higher tariffs looms over all sectors alike. Equity markets remain cautious, with a weaker rupee potentially fuelling inflation and weighing on corporate margins.

RBI Decision Offers Relief

The recovery in the rupee came after the Reserve Bank of India (RBI), in its third bi-monthly monetary policy announcement, kept the repo rate unchanged at 5.5 percent. The central bank also retained its neutral stance amid global trade uncertainties. RBI Governor Sanjay Malhotra reaffirmed the growth projection for FY26 at 6.5 percent.

Forex Market Movement

At the interbank foreign exchange market, the rupee opened at 87.72 and moved within a tight range of 87.63 to 87.80 before settling at 87.73. This marked a sharp reversal from Tuesday’s close of 87.88, when the rupee had touched a fresh intra-day record low.

Tariff Concerns and External Pressures

Despite the recovery, gains were capped by rising crude oil prices and lingering concerns over potential US penal tariffs on India for continued oil purchases from Russia. These tariffs are expected to be clarified by Friday, adding a layer of uncertainty to currency markets.

Brent crude futures were trading 1.45 percent higher at USD 68.62 per barrel, weighing on India’s import bill and potentially pressuring the rupee.

Market Sentiment and Dollar Index

The US dollar index, which measures the greenback against six major currencies, edged up 0.01 percent to 98.79 after an overnight dip.

Domestic Equities and FII Activity

On the equities front, domestic markets ended in the red. The BSE Sensex declined 166.26 points to 80,543.99, while the NSE Nifty dropped 75.35 points to 24,574.20.

Foreign institutional investors were net sellers, offloading ₹22.48 crore worth of shares on Tuesday, as per exchange data.

Disclaimer:  At HDFC SKY, we take utmost care and due diligence in curating and presenting news and market-related content. However, inadvertent errors or omissions may occasionally occur.

If you have any concerns, questions, or wish to point out any discrepancies in our content, please feel free to write to us at content@hdfcsec.com.

Please note that the information shared is intended solely for informational purposes and does not make any investment recommendations