Rupee Opens Stronger Ahead of RBI MPC Decision; Eyes on Tariff Risks

Mumbai, August 6, 2025 – The Indian rupee opened stronger against the US dollar on Wednesday, ahead of the Reserve Bank of India’s Monetary Policy Committee (MPC) decision due later today. The INR was up by 8 paise, starting the day at ₹87.72 versus the US dollar (last closing price was ₹87.80).

The rupee’s strength to start the day offers a hint of cautious optimism in the market, but global uncertainties, along with surface frictions globally and geopolitically, are still evident.

Impact on Markets and Investors

Amidst the US President’s latest threat to ‘substantially increase’ the tariffs on Indian imports, the overall situation remains quite volatile in the currency market, having a direct implication on the equities.

In addition, the rising U.S. tariff threats may trigger capital outflows, pressuring the rupee and potentially raising import-led inflation. Investors may see increased FX volatility, and any dovish signals from the RBI could push the rupee higher. Foreign flows into equities may slow, while cautious sentiment could limit upside in interest-sensitive sectors.

Brent Crude Slides; Pressure on Importers

Brent crude prices slipped to a one-month low of $67.99 per barrel, weighed down by sanctions targeting buyers of Russian crude. Meanwhile, the US administration is expected to extend its tariff threats to nations like India and China. As a result, oil-linked outflows may persist, exerting further pressure on the rupee’s trajectory.

What’s Ahead for Today?

Markets are closely watching the Reserve Bank of India’s interest rate decision, scheduled for later today. While most analysts anticipate no change in rates, the central bank’s commentary on inflation and economic growth will be closely scrutinised for cues on the rupee’s trajectory.

Since February, the RBI has cut the repo rate by 100 basis points across three rounds. However, fresh economic headwinds, most notably the U.S. imposing a 25% tariff on Indian imports effective August 7, may prompt the central bank to adopt a more cautious stance before considering further rate reductions.

With global headwinds intensifying, all eyes remain on the RBI’s tone today to gauge the future course for the rupee and broader market sentiment.

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