The Indian rupee faced significant pressure on Thursday, declining by 7 paise to close at 89.94 against the US dollar. The local currency was weighed down by a combination of factors including higher crude oil prices, foreign fund outflows, and a stronger greenback, creating a challenging environment for the rupee.

Trading Session Performance

During the interbank foreign exchange session, the rupee demonstrated volatility with specific trading parameters:

The currency's performance reflected broader market concerns about potential trade policy changes and their impact on India's export competitiveness.

Market Sentiment and Expert Analysis

Market experts highlighted the significant challenges facing the rupee amid ongoing trade uncertainties. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, emphasized the potential impact of US tariff policies on Indian exports. He noted that even a 10 basis point increase in US tariffs could create substantial trouble for India's export sector, shifting market sentiment from optimism about potential deals to concerns about returning to square one.

For Friday's trading session, Bhansali projected the rupee to trade within a range of 89.80 to 90.30, indicating continued volatility expectations.

Global Market Dynamics

International market conditions contributed to the rupee's weakness through several key indicators:

The dollar index, which measures the greenback's strength against six major currencies, showed marginal gains, while Brent crude's rise added to inflationary pressures on the Indian economy.

Domestic Equity Market Impact

Domestic equity markets experienced significant selling pressure, further weighing on rupee sentiment:

Foreign institutional investors continued their selling spree, offloading equities worth ₹1,527.71 crore on Wednesday according to exchange data, contributing to the overall negative sentiment in financial markets.

Economic Growth Projections

Despite currency and market challenges, the government maintained an optimistic economic outlook in its latest estimates released on Wednesday. The Ministry of Statistics and Programme Implementation projected India's GDP growth at 7.4% for the current fiscal year, positioning the country as the world's fastest-growing major economy. The First Advance Estimates for 2025-26 indicated growth exceeding 7.3%, surpassing both the RBI's forecast and the government's initial projection range of 6.3-6.8%.

The Indian rupee concluded Thursday's trading session at 90.0175, marking a decline from the previous day's close of 89.88, despite active intervention by the Reserve Bank of India. The currency experienced significant intraday volatility as multiple factors influenced its trajectory throughout the session.

Market Performance and RBI Intervention

The rupee's trading pattern reflected the ongoing tug-of-war between central bank support and market pressures. Key movements during the session included:

Bankers confirmed that the RBI intervened for the second straight day, providing temporary support that helped the currency recover from its opening level to 89.75. However, this intervention proved insufficient to sustain the rupee's strength against mounting external pressures.

Market Dynamics and Trading Sentiment

Traders observed that currency movements have become increasingly dominated by central bank actions. "Market moves have again started to be dominated by one large player, and the currency changes direction based on the presence or absence of RBI," noted a trader with a foreign bank.

Bankers expressed skepticism about the sustainability of the rupee's recovery to 89.75 from the 90.30 level hit on Tuesday. Market participants were actively advising importer clients to hedge their positions during periods of rupee strength, indicating cautious sentiment among corporate users.

External Pressures and Market Factors

Anil Bhansali, head of treasury at Finrex Treasury Advisors, identified multiple factors weighing on the currency: "The combined effect of 500% tariffs proposed by U.S., fall in equity markets, RBI short forward positions kept the pressure on the rupee consistently even though RBI came intermittently to sell dollars."

The equity markets continued their downward trajectory for the fourth consecutive session, with the Nifty 50 Index dropping 1.00% amid foreign outflows. The selling pressure was particularly pronounced in export-oriented firms as US tariff worries intensified.

Forward Market Activity

The forward currency market showed increased activity as market participants positioned for continued volatility. Bhansali noted that "rupee premiums again have started to move up as importers bought and paid for forward positions of their import holdings," indicating heightened hedging demand from corporate users.

Upcoming Market Events

Market attention is now focused on the US non-farm payrolls report scheduled for release after Indian market hours on Friday. This data is expected to provide fresh insights into the US labor market conditions and potential Federal Reserve policy direction for 2026, which could influence global currency movements and capital flows.