The Indian rupee faced downward pressure in morning trading, depreciating 5 paise to reach 88.76 against the US dollar. This decline is attributed to the strength of the American currency and negative trends in domestic equity markets.

Narrow Trading Range

The USD/INR pair exhibited a constrained trading range, influenced by various factors including:

• Pressure from US policies
• Ongoing trade tensions
• Global economic uncertainties

The domestic currency opened at 88.68 before touching 88.76, reflecting the cautious sentiment in the forex market.

Global and Domestic Factors

Several elements contributed to the rupee's depreciation:

• The dollar index rose 0.04% to 97.88, indicating broader strength in the US currency
• Brent crude prices increased by 0.55% to $64.46 per barrel, potentially impacting India's import bill
• Persistent foreign fund outflows continued to exert pressure on the rupee
• The ongoing US visa fee hike issue added to concerns in the market

Domestic Market Performance

Indian stock markets mirrored the bearish sentiment:

Foreign Institutional Investors (FIIs) sold equities worth Rs 1,605.20 crore on a net basis, further contributing to the market's downward trend.

RBI Stance and Future Outlook

The Reserve Bank of India (RBI) maintained a cautious approach:

• Interest rates were kept unchanged in the latest monetary policy review
• RBI Governor Sanjay Malhotra hinted at potential easing in the coming months
• The central bank aims to support the economy against possible impacts from US tariffs

As global uncertainties persist and domestic challenges remain, market participants will closely monitor further developments in US-India trade relations, global economic indicators, and the RBI's policy actions in the near term.

The Indian rupee closed at 88.69 against the U.S. dollar, gaining 0.10% in its strongest performance in two weeks. This positive movement came as the Reserve Bank of India (RBI) kept policy rates unchanged while signaling potential rate cuts as it evaluates impacts of domestic tax cuts and U.S. tariffs.

RBI Intervention and Currency Market Dynamics

The central bank likely intervened to support the currency, with state-run banks spotted offering dollars early in the session. This intervention came just hours before the RBI's anticipated policy decision, as the rupee had opened near its record low of 88.80 reached on Tuesday.

The dollar index fell 0.20% to 97.60 amid a U.S. government shutdown, contributing to the rupee's relative strength.

Stock Market Response

India's BSE Sensex and Nifty 50 both rose 0.90%, driven by banking stocks after the RBI announced measures to boost bank lending to capital markets and large corporates.

New Measures to Boost Rupee's International Usage

The RBI introduced several measures aimed at increasing the global use of the Indian rupee:

1. Allowing Indian banks to provide rupee-denominated loans to businesses in Bhutan, Nepal, and Sri Lanka for cross-border trade transactions.
2. Establishing transparent reference rates for currencies of India's major trading partners to facilitate rupee-based transactions.
3. Permitting foreign entities to invest surplus rupee balances in their vostro accounts into corporate bonds and commercial papers, expanding beyond the previously allowed central government securities.

Governor Sanjay Malhotra stated that the bank has been making steady progress on rupee internationalization.

Future Outlook

ANZ analysts project gradual rupee depreciation over the medium term. The RBI's multifaceted approach, including currency market intervention, new internationalization measures, and policy decisions, underscores its commitment to maintaining stability in the currency markets while promoting the rupee's global role.

As these developments unfold, their implications for India's currency and economy will be closely monitored by market observers and economists alike.