Rupee opens 19 paise lower at 86.45/$; RBI MPC's rate decision in focus

The Indian Rupee extended its fall for the third consecutive day on Wednesday, as investors gear up for the interest rate decision by the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) amid global trade uncertainties. 

 

The domestic currency weakened 19 paise to open at 86.45 against the greenback after closing at 86.26 on Tuesday, according to Bloomberg data. The currency declined further to 86.52 in early trading. Over the past three days, it has depreciated by 0.84 per cent.

 

The RBI’s MPC is expected to announce its latest policy decision today, Wednesday, with experts forecasting a 25-basis-point rate cut. All attention will be on Governor Sanjay Malhotra’s statement on the global uncertainties arising from US President Donald Trump’s trade tariffs. 

 

 

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 102.32, as of 9:10 AM 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 2.77 per cent to $61.08 per barrel, while WTI crude was up 3.11 per cent at 57.73 per barrel as of 9:20 AM IST. 

 

While China has been selling US treasuries for the past two days, India and Japan seem to have ruled out selling them, Anil Kumar Bhansali, head of treasury and executive director of Finrex Treasury Advisors LLP, said. “Indian rupee will open weaker due to risk of sentiments of the market.”