Indian Rupee ends at 86.69/$; Falls 43 paise after RBI cuts repo rate

The Indian Rupee extended its fall for the third consecutive day on Wednesday, after Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) unanimously cut the repo rate by 25 basis points and changed its stance to ‘accommodative’. 

 

The domestic currency weakened 43 paise to end at 86.69 against the greenback after closing at 86.26 on Tuesday, according to Bloomberg data. In the last three sessions, the currency has depreciated by ₹1.45 as global trade uncertainties increase with US tariffs. 

 

The RBI unanimously decided to reduce the repo rate by 25 basis points to 6 per cent, Governor Sanjay Malhotra announced on Wednesday. This marks the second rate cut this year. The MPC has shifted to an ‘accommodative’ stance. India’s real gross domestic product (GDP) is expected to grow by 6.5 per cent year-on-year, revised downward from the earlier projection of 6.7 per cent for the ongoing financial year 2025–26 (FY26).  

 

Tension on the tariffs war escalated with Trump’s decision to impose a 50 per cent additional tariff on China, bringing the total tariff to 104 per cent. The dollar index — a measure of the value of the US dollar relative to a basket of foreign currencies — was down 0.62 per cent at 102.31, as of 3:35 PM IST. 

 

While global cues like falling crude oil and a softening dollar should have favoured the rupee, a mix of domestic liquidity actions and external shocks like weakening yuan pulled it lower, according to experts. The Chinese Yuan fell to its lowest level since September 2023 after indications that the Chinese central bank would be more tolerant of weak currency to counter the impact of the tariff.  

 

This sharp yuan depreciation has reignited concerns as a weaker yuan gives Chinese exporters a competitive edge, potentially hurting India’s external competitiveness, according to Amit Pabari, managing director at CR Forex Advisors. While the 25 pbs rate cut might pressure the rupee in the near term, the increase in spending will boost economic growth, supporting the rupee in the medium term, he added. “Given the current market scenario, we now expect Rupee to face strong resistance around the 86.40–86.50 levels, while 85.70 is likely to act as a key support.”

 

Crude oil prices extended the rout for the fifth straight session to a four-year low as investors remain cautious on the trade war front. Brent crude oil was down 3.92 per cent to $60.36 per barrel, while WTI crude was down 3.88 per cent at 57.27 per barrel as of 3:35 PM IST.