The Indian rupee declined 0.30% on Friday, closing at 87.53 against the dollar, marking a 0.02% weekly loss. This depreciation comes amid increasing demand for the greenback and ongoing volatility in the currency markets.

Weekly Performance

The currency experienced significant volatility throughout the week, initially strengthening above 87 on Tuesday due to diplomatic talks between US, Russian, and Ukrainian presidents, along with proposed Indian government tax cuts. However, concerns over US tariffs on Indian goods scheduled for August 27 and criticism over Russian oil purchases pressured the currency lower.

Factors Influencing the Rupee

Several factors are currently at play in the currency market:

1. Rising Dollar Demand: Increased demand for US dollars, particularly from importers and a public sector bank, has been a primary driver of the rupee's depreciation.

2. Strengthening Dollar Index: The dollar index rose 0.14% to 98.74, approaching the 99-mark ahead of Federal Reserve Chair Jerome Powell's Jackson Hole speech. This put additional pressure on the rupee.

3. Crude Oil Prices: A marginal decline in oil prices provided some relief, as lower oil prices typically benefit the rupee, given India's status as a major oil importer.

4. Foreign Institutional Investors (FIIs): Despite the rupee's decline, FIIs remained net buyers in the Indian equity market, which helped prevent steeper losses for the rupee.

5. Domestic Equity Markets: The Indian stock markets opened lower, potentially contributing to the pressure on the rupee.

Market Sentiment and Trade Tensions

Traders are closely watching for Fed Chair Jerome Powell's speech at the Jackson Hole Symposium, which could provide insights into future US monetary policy and potentially impact currency markets.

Adding to market uncertainty are potential additional US tariffs on Indian exports. The possibility of a 25% tariff increase scheduled for August 27 has raised concerns and could further influence the rupee's trajectory.

Asian Currency Performance

Most Asian currencies traded lower, with the Taiwan dollar and Indonesian rupiah leading losses, while the Korean won and Philippine peso gained in intraday trading.

As global economic factors continue to evolve, the rupee's performance will likely remain subject to these various domestic and international influences in the near term.

The Indian rupee declined 0.24% to close at 87.2700 per U.S. dollar, pressured by aggressive dollar buying from oil importers late in the trading session. This movement reverses the earlier gains seen in early trade on Thursday, where the rupee had appreciated 14 paise against the US dollar.

Currency Movement

Despite opening at 87.04 and reaching an early high of 86.93 against the US dollar, compared to its previous close of 87.07, the rupee ultimately weakened by the end of the trading day.

Factors Influencing the Rupee

Several factors contributed to the rupee's performance:

1. Oil Importer Demand: Aggressive dollar buying from oil importers late in the trading session put pressure on the rupee.

2. Foreign Bank Activity: Foreign banks continued selling dollars against the rupee for the third consecutive day, which helped limit losses.

3. Debt Inflows: Initially, debt inflows masked the impact of dollar demand.

4. Upcoming Tariffs: The rupee faces headwinds from the upcoming August 27 deadline for additional 25% U.S. tariffs on Indian goods.

5. Geopolitical Tensions: U.S. Treasury Secretary Scott Bessent's recent comments about India profiteering from Russian oil purchases added pressure.

Market Developments

Despite the overall negative sentiment by the end of the day, earlier positive factors included:

• Positive domestic equities, with the Sensex rising 373.33 points to 82,231.17 and the Nifty gaining 94.3 points to 25,144.85 in early trade.
• Increased risk appetite in global markets.
• Hopes for peace between Russia and Ukraine, along with easing India-China tensions following Chinese Foreign Minister Wang Yi's visit to New Delhi.

Global Market Indicators

Looking Ahead

Currency analysts expect the rupee to remain weak in the near term. Market participants are keenly awaiting Federal Reserve Chair Jerome Powell's speech at Jackson Hole for guidance on U.S. interest rate direction. The rupee's performance in the coming days may be influenced by a combination of domestic factors, global market sentiment, and central bank policies.