Rupee rebounds from record lows amid Fed cut bets; opens higher at 88.38/$

Indian Rupee today: The domestic currency opened 6 paise higher at a new low of 88.38 against the greenback on Friday

The Indian Rupee opened higher on Friday, rebounding from its record low in the previous session, even as the dollar firmed on expectations of a Federal Reserve rate cut.

 

The domestic currency opened 6 paise higher at 88.38 against the greenback on Friday, according to Bloomberg. So far this year, the rupee has depreciated 3.24 per cent, making it the worst performer among Asian peers.

 

The currency fell to a fresh low of 88.44 on Thursday due to demand from government defence and foreign portfolio investors (FPIs) apart from the usual oil demand, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. The heavy US tariffs are pressuring both the rupee and the investment climate, Bhansali added. 

 

   

The Reserve Bank of India (RBI) has been intervening to slow down the intervention but not change the direction of the downfall, according to Bhansali. "The currency pair may now consolidate for a few days with continued upward risk unless trade tensions ease." 

 

There is some optimism to be seen if trade talks progress, but momentum currently favours further dollar strength unless macro risks abate. The dollar index traded higher amid increased expectations of a Federal Reserve rate cut this month after the consumer inflation print. The core consumer price index increased 0.3 per cent from July, while the overall CPI rose 0.4 per cent, the most since the start of the year.

 

The dollar index, a measure of the greenback against a basket of six major currencies, was up 0.10 per cent at 97.64. 

 

Despite the recent pressure, analysts at YES Securities see limited downside in the domestic currency from current levels. "Indian rupee's slide past the 88-mark largely reflects US tariff-driven sentiment rather than a deterioration in India’s underlying fundamentals, suggesting limited room for further depreciation," the brokerage said. 

 

"This suggests the rupee is not structurally overvalued and may even be on the brink of undervaluation after August's steeper fall against the basket of currencies," YES Securities said.

 

Investors await industrial production data from Japan and the UK; GDP and trade data from the UK; and consumer sentiment data from the University of Michigan in the US. Back home, investors await inflation numbers for August and foreign exchange reserve figures.

 

In commodities, crude oil prices were trading lower as concerns over softening US demand and global oversupply outweighed support from recent geopolitical tensions. Brent crude price was down 0.83 per cent at 65.82 per barrel, while WTI crude prices were lower by 0.90 per cent at 61.81 per barrel, as of 9:15 AM IST.