Rupee weakens on importers' demand amid decline in the dollar index

The rupee closed at 85.55 against the dollar on Thursday amid oil importer demand, while RBI bond purchases and soft crude prices supported market sentiment

The rupee weakened on Thursday mainly due to dollar demand from oil companies, said dealers. However, the broad-based fall in dollar index limited losses for the local currency.

 

The INR depreciated up to 85.73 per dollar during the day before regaining some strength to settle at 85.55, against the previous close of 85.28.

 

“The Indian currency and local stock markets navigated a session defined by considerable price swings. Although the rupee rallied to finish close to its session peak, it ultimately concluded with declines, largely influenced by the need for the US currency from petroleum purchasers and those managing financial risk. In the short term, the USDINR spot exchange rate seems likely to fluctuate between a lower boundary of 84.95 and an upper barrier of 86,” said Dilip Parmar, senior research analyst, HDFC Securities.

 

The dollar edged lower on Thursday as enthusiasm over the US-China trade deal began to fade amid speculation that the Trump administration is aiming for a weaker currency. The dollar Index, which measures the greenback against a basket of six major currencies, slipped 0.3 per cent to 100.780, though it remained on track for modest weekly gains.

 

The rupee has appreciated by 0.07 per cent in the current calendar year (CY26) so far. However, in the current financial year (FY26), the local currency has witnessed 0.09 per cent depreciation so far. 

 

“Foreign portfolio investors (FPIs) were on the buying side (dollar). But looking at the dollar and crude, we did not breach the technical 85.75 level,” said a dealer at a state-owned bank. “The rupee has been really volatile recently. Therefore, determining a specific level is difficult, but we will be looking at the dollar index for now,” he added.

 

Crude oil prices dropped sharply amid concerns that a potential nuclear deal between Iran and the US could boost global supply.

 

On the other hand, the Reserve Bank of India (RBI) purchased ₹25,000 crore worth of government bonds via open market operation (OMO) auction on Thursday. The central bank received bids worth ₹71,149 crore at the auction.

 

Consequently, the benchmark 10-year government bond yield softened by 2 basis points (bps) to settle at 6.27 per cent, lowest since October 7, 2021, against the previous close of 6.29 per cent.

 

“It was a combination of both OMO and the favourable data,” said a dealer at another state-owned bank. “The next level is 6.25 per cent (yield on benchmark bond),” he said.