The Indian rupee concluded a tumultuous week on Friday, closing at 88.09 against the U.S. dollar, marking a 0.2% gain for the week despite significant volatility in the currency markets. The week's trading saw the rupee experience notable fluctuations, reaching a high of 87.72 before retreating to near all-time lows.

Federal Reserve's Impact

The rupee's movements were largely influenced by the Federal Reserve's recent policy decision. Despite the Fed's rate cut, the dollar and U.S. bond yields rose, putting pressure on the Indian currency. This unexpected market reaction highlights the complex interplay between global monetary policies and currency valuations.

Dollar Strength and Asian Currencies

The dollar index gained 0.2% to reach 97.50, reflecting broader strength in the U.S. currency. This rise in the dollar's value coincided with a general weakening of Asian currencies, placing the rupee's performance in a regional context.

Trading Outlook

Currency traders are eyeing a trading range of 87.50-88.50 for the rupee in the near term, with a slight bias towards depreciation. This outlook suggests continued volatility and potential challenges for the Indian currency.

U.S.-India Trade Relations

Adding to the currency's woes are ongoing concerns about potential U.S. tariffs. However, there's a glimmer of optimism stemming from recent trade talks between New Delhi and Washington, which could potentially alleviate some pressure on the rupee.

Equity and Bond Market Performance

Despite the currency's volatility, Indian equity markets showed resilience:

This divergence between equity and currency markets underscores the complex dynamics at play in India's financial landscape.

The week's events highlight the intricate relationships between global monetary policies, trade negotiations, and currency valuations. As the rupee navigates these choppy waters, market participants will be closely monitoring both domestic factors and international developments that could influence its trajectory.

The Indian rupee depreciated 28 paise to close at 88.13 against the US dollar on Thursday. The decline was driven by hawkish Federal Reserve commentary and a stronger US dollar. The Fed cut interest rates by 25 basis points as expected and indicated two more 25 bps cuts in 2025 and one in 2026. Fed Chair Jerome Powell raised concerns about the labor market and GDP growth while not seeing elevated financial risks from tariffs.

Rupee's Performance

The rupee faced additional pressure from:

• Worries over US tariffs on India
• Global trade uncertainties
• Sustained foreign fund outflows

Foreign Institutional Investors (FIIs) sold equities worth ₹1,124.54 crore on Wednesday.

Market Movements

Oil Markets

Brent crude traded 0.43% lower at $67.66 per barrel.

Export Projections

Union Commerce Minister Piyush Goyal expressed confidence that India's exports would grow around 6% this year, with free trade agreement discussions advancing with several countries.

Conclusion

The currency market remains sensitive to both domestic economic indicators and global monetary policy shifts. Traders and businesses are advised to monitor these developments closely as they navigate the volatile forex landscape.