Rupee Falls 18 Paise to 85.94 Against US Dollar Amid Trade Pact Uncertainty

Mumbai, July 16 – The Indian rupee weakened by 18 paise on Wednesday, settling at ₹85.94 against the US currency, as broad dollar strength and fresh doubts over the India–US trade pact dented investor sentiment. The rally in the dollar was aided by positive US economic data this week, while trade negotiators from both countries indicated a postponement in finalising the agreement.

Adding to the pressure, India’s services sector PMI fell to a three-month low in July, supporting expectations of persistent capital outflows. Investors now look to next week’s RBI policy announcement and the result of India-US trade negotiations for new leads.

Dollar Strength Pressures Rupee

In the interbank foreign exchange market, the rupee opened weakly at 86.02 and traded in a range of 85.74 to 86.05 during the day. It finally settled at 85.94, compared to the last close of 85.76.

The rupee depreciated as the US dollar rose against major world currencies on hopes of a hawkish policy by the US Federal Reserve amid recent inflation readings.

Trade Pact Talks Weigh on Sentiment

Market participants remained cautious as a delegation from India’s commerce ministry engaged in a four-day negotiation in Washington over a bilateral trade agreement. The talks, which began Monday, are set to conclude Thursday. The lack of clarity over the outcome added pressure on the domestic currency.

Crude and FPI Flows Provide Support

Despite the rupee’s fall, positive foreign capital inflows and softening crude oil prices helped limit losses. Brent crude futures declined 0.26% to USD 68.53 per barrel, easing some import cost pressures.

Foreign institutional investors (FIIs) were net buyers in the equity markets, purchasing shares worth Rs 120.47 crore on Tuesday, according to stock exchange data.

Narrow Trading Band Likely to Continue

The rupee’s recent movement came after a three-day consolidation phase, with the USDINR pair fluctuating in a tight band of 85.70 to 86.05. Analysts expect the currency to remain range-bound in the near term.

Equity Markets Stay Positive

On the equities front, benchmark indices closed marginally higher, with the BSE Sensex rising 63.57 points to 82,634.48, and the NSE Nifty gaining 16.25 points to 25,212.05.

The dollar index, which measures the greenback against six major currencies, slipped 0.07% to 98.54, providing limited relief to emerging market currencies like the rupee.

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