Rupee Rises 42 Paise to 85.34 vs US Dollar as Greenback Weakens; Equities Aid Sentiment

Mumbai, July 1, 2025: The Indian rupee gained sharply by 42 paise to 85.34 against the US dollar in early trade on Tuesday, driven by a weaker greenback and firm domestic equities.

Dollar Slips to Multi-Month Low Amid Political Concerns

At the interbank foreign exchange, the rupee opened at 85.66 and quickly climbed to 85.34, marking a strong appreciation from Monday’s close of 85.76. The early gains came as the US dollar index dropped to 96.71, hitting a multi-month low of 96.614.

Traders attributed the decline in the dollar to political developments in the United States. The growing influence of former President Donald Trump on Federal Reserve policy, particularly speculation about a possible replacement of Fed Chair Jerome Powell, has raised concerns about the Fed’s independence and unsettled global markets.

Oil Prices Subdued, Supporting Rupee

Brent crude prices also eased, trading 0.24 percent lower at USD 67.61 per barrel. The softening of crude provides relief to India’s import bill and could help contain inflationary pressures, further supporting the rupee.

Domestic Equities Provide Tailwind

Positive momentum in domestic stock markets added to the rupee’s strength. The BSE Sensex advanced 200.92 points or 0.24 percent to 83,807.38, while the NSE Nifty climbed 57.85 points or 0.23 percent to 25,574.90 in early trade.

Foreign Investment and Economic Indicators

Despite the rupee’s gain, foreign institutional investors (FIIs) remained net sellers on Monday, pulling out ₹831.50 crore from domestic equities, as per exchange data.

On the macro front, India’s industrial output slowed to 1.2% in May, a nine-month low, amid subdued performance in manufacturing, mining, and power, partly due to early monsoon disruptions. Meanwhile, the Centre’s fiscal deficit came in at just 0.8% of the FY26 target, aided by a substantial ₹2.69 lakh crore dividend transfer from the Reserve Bank of India.

Market Outlook for USDINR

Market experts see strong support for the USDINR pair in the 85.20–85.40 range, with expectations of a rebound toward 86–86.50 due to weak domestic data, foreign outflows, and global uncertainties in the near term.

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