Rupee remains steady due to likely RBI intervention amid tariff tensions

Rupee settles nearly flat at 87.71 per dollar despite US tariff escalation; forex dealers cite likely RBI intervention through dollar sales and NDF operations

The rupee remained steady on Thursday on likely intervention by the Reserve Bank of India (RBI) in the foreign exchange market via dollar sales after the United States slapped an additional 25 per cent tariff on exports of Indian goods yesterday, said dealers. 

India now faces the highest US tariff of 50 per cent, at par with Brazil. This additional tariff is applicable from 28 August. 

The local currency settled at 87.71 per dollar, almost flat against the previous close of 87.74 per dollar. 

“USDINR needs to close above the 87.95–88.00 per dollar zone to confirm that a fresh up-move is emerging. However, considering the recent moves, it appears that the central bank is committed to preventing the rupee from depreciating further,” said Abhishek Goenka, chief executive officer at IFA Global. 

 

US President Donald Trump imposed an additional 25 per cent tariff on Indian goods, citing India's ongoing imports of Russian oil. The move effectively raises the total duty on select Indian exports to 50 per cent.

 

“The economic impacts of the tariffs are a concern, with potential downward revisions to India’s GDP growth forecast due to the heightened trade tensions. Thus, the Indian rupee today is under pressure but remains steadied by central bank intervention and sectoral dynamics in the Indian economy,” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors.

 

The US accounted for around 4 per cent of India's crude oil imports (in volume terms) in FY25, increasing from around 1 per cent in FY24, while Russian imports constitute around a third of Indian oil imports, according to a report by Goldman Sachs.

 

The Indian unit depreciated 2.09 per cent in July and 0.12 per cent in August so far. 

 

“The RBI intervened, while foreign investors were on the selling side,” said a dealer at a state-owned bank. “They are intervening in the non-deliverable forwards (NDF) market too, otherwise the rupee would have fallen below 88 per dollar in the previous week,” he added.

 

The rupee has depreciated by 2.55 per cent in the current financial year, whereas it has witnessed 2.39 per cent depreciation in the current calendar year.

 

Meanwhile, the RBI conducted another overnight variable rate reverse repo (VRRR) auction as the surplus liquidity in the banking system continues to hover around ₹4 trillion. On Wednesday, the net liquidity in the banking system was in a surplus of ₹3.90 trillion, according to the latest data from the RBI.

 

The central bank received bids worth ₹49,055 crore at the auction against the notified amount of ₹50,000 crore. The RBI accepted the bidding amount at a cut-off rate of 5.49 per cent.

 

Consequently, the weighted average call rate (WACR), the operating target of monetary policy, settled at 5.43 per cent on Thursday, against the previous close of 5.33 per cent.

 

The RBI’s VRRR operations are aimed at absorbing surplus liquidity from the system and anchoring short-term rates closer to the policy repo rate.