Dollar strengthens, causing Indian currency to diminish by 18 paise, trading at 86.88 rupees in initial market transactions.
Published on July 29, 2025
The Indian rupee depreciated 18 paise to 86.88 against the US dollar in early trade on Tuesday, marking a weaker opening for the domestic currency. This decline is primarily due to a combination of global macroeconomic factors, fiscal vulnerabilities, and geopolitical risks.
Geopolitical tensions, particularly with Pakistan, have spooked investors, pushing capital toward the safer US dollar. Additionally, oil price surges above $85-$100/barrel have heightened India's dollar demand due to crude being imported and paid for in dollars, worsening the trade deficit.
The US Federal Reserve's high interest rates (~5.25-5.50%) attract global capital into the dollar, weakening emerging market currencies like the rupee. India’s current account deficit (~1.1-1.4% of GDP) due to weak exports and high imports (including gold) sustains pressure on the rupee's value.
The rupee depreciation creates volatility and risk for foreign institutional investors (FIIs), who face currency losses when converting rupee gains back to stronger dollars. This can lead to withdrawal of foreign capital, causing pressure on Indian equities like the Sensex and Nifty.
However, a weaker rupee also benefits export-oriented sectors, such as IT and Pharma, listed on Sensex and Nifty, as their earnings in dollars convert to higher rupee revenue, potentially supporting stock prices in those industries.
Persistent currency weakness combined with inflationary pressures and geopolitical risks can dampen overall market sentiment, weighing on broader indices. Trade deal and earnings are in focus for the stock market.
On Tuesday, the Sensex was trading 51.09 points or 0.06% higher at 80,942.11, while the Nifty rose 18.30 points or 0.07% to 24,699.20. The dollar index, which gauges the greenback's strength against a basket of six currencies, rose marginally by 0.01% to 98.64.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, predicted that the rupee could fall to one-month low of 86.90 this week. Forex traders reported a negative bias for the domestic unit due to continued demand for dollars from importers.
[1] Geopolitical tensions, oil prices, US Federal Reserve's interest rates, and India's current account deficit contribute to rupee depreciation. [2] Rupee depreciation creates volatility and risk for FIIs, potentially leading to withdrawal of foreign capital and pressure on Indian equities. [3] Weaker rupee benefits export-oriented sectors, but overall market sentiment can be dampened by persistent currency weakness, inflationary pressures, and geopolitical risks.
[4] Live market analysis reveals the Sensex and Nifty trading higher despite the rupee's depreciation, indicating a resilience in the Indian stock markets. [5] Amid this uncertainty, an increasing number of subscribers have sought education-and-self-development resources in personal-finance and technology to better understand and navigate the complexities of the economy. [6] The financial industry has observed a growth in demand for subscription-based services offering live updates and expert advice on business, general-news, and investment opportunities.
[7] The energy sector remains crucial in international trade, with the upcoming global energy transition serving as a fertile ground for both risks and opportunities. [8] As countries shift towards renewable energy sources, technology companies are poised to play significant roles in financing, developing, and implementing these changes, signifying a powerful intersection of finance, technology, and education-and-self-development.
