The Indian rupee was reported to have weakened on Thursday as renewed tariff tensions and dollar demand from foreign banks applied downward pressure on the currency. According to market participants, the rupee had declined by nearly 0.3% by late morning, with the exchange rate touching 85.8650 against the U.S. dollar as of 11:30 a.m. IST. This drop was attributed in part to continued strength in the greenback following the latest announcement by U.S. President Donald Trump regarding fresh tariff impositions.
It was revealed that President Trump had escalated trade tensions by declaring a new 35% tariff on imports from Canada, effective from August 1. Furthermore, plans to apply additional tariffs of 15% to 20% on other key trading partners were also mentioned. It had been anticipated that the European Union would be formally informed of its assigned tariff rate by the end of the week. These developments were seen as heightening global economic uncertainty, and although reactions to such announcements had become somewhat muted over time, investor sentiment was believed to have remained cautious, particularly in emerging markets like India.
In this context, foreign portfolio outflows were noted by traders as another contributing factor to the rupee’s depreciation. The weakening of India’s domestic currency coincided with a 0.7% decline in the Nifty 50 index, the country’s benchmark equity gauge. Government bonds were also affected, with the benchmark 10-year yield reportedly experiencing modest weakness amid the broader risk-off tone.
Across the broader Asian currency landscape, mixed performances were observed. The Chinese yuan managed to edge higher after the People’s Bank of China set a midpoint fix that exceeded market expectations, offering brief support to regional sentiment. However, the overall atmosphere was said to have been clouded by the uncertainty surrounding trade policies emanating from Washington.
Market analysts noted that the rupee’s ability to appreciate in the current environment appeared limited. It was pointed out by foreign exchange strategists that support around the 85.50 mark continued to hold, although the likelihood of the rupee drifting closer to 86.00 remained high. This view was shared by Amit Pabari, managing director at CR Forex, who stated that due to the prevailing global backdrop, upside momentum for the rupee had become increasingly constrained.
Meanwhile, data from currency trading desks showed that the daily reference rate—or the dollar-rupee fix—was quoting at a modest premium of around 0.2 to 0.3 paisa. This was interpreted by market participants as a sign of sustained appetite among investors and corporates to buy dollars during the fix window, particularly as a means of hedging trade and investment exposure.
Despite the overall downward movement in the rupee, there were indications that some intervention had been carried out to limit the losses. A trader at a private bank noted that a large state-run financial institution was observed selling dollars at the 85.90 level, which served to check further rupee depreciation. Such interventions are often viewed as efforts to prevent abrupt movements in the foreign exchange market, especially amid heightened geopolitical and economic tensions.
In the derivatives segment, forward premiums on the dollar-rupee pair showed a slight upward bias. The one-year implied yield rose by approximately 3 basis points to 1.98%, while the one-month forward premium edged up to 11.25 paisa. Traders attributed this movement to the Reserve Bank of India’s recent measures aimed at tightening domestic liquidity conditions.
It had been noted that the central bank’s more aggressive stance on withdrawing excess liquidity from the banking system exerted pressure on near-term forward rates, increasing the cost of hedging foreign exchange exposure. This was consistent with the RBI’s broader monetary strategy to maintain currency stability and anchor inflation expectations, particularly in an environment where global financial markets had become increasingly volatile due to tariff concerns and geopolitical risk.
As the week progressed, it was expected by traders and analysts alike that the rupee would remain under pressure unless global risk sentiment improved or meaningful progress was made in resolving ongoing trade disputes. Until then, the Indian currency was forecast to trade within a narrow but downward-sloping band, with central bank actions and foreign capital flows continuing to influence short-term direction.
