The Indian rupee weakened slightly on Wednesday, tracking modest declines in its regional peers while investors kept their focus on a looming U.S. tariff deadline as well as cues on the future path of the Federal Reserve's benchmark policy rates. The rupee dipped about 0.2% to 85.6850 per U.S. dollar as of 11:15 a.m. IST. Get the latest news from India and how it matters to the world with the Reuters India File newsletter. Sign up here. Asian currencies were mostly lower as well, while the dollar index rose 0.1% to 96.7, supported by stronger-than-expected U.S. economic data that lent credence to the Fed's stance of being patient on cutting interest rates.
Fed Chair Jerome Powell on Tuesday reiterated that the U.S. central bank plans to "wait and learn more" about the impact of tariffs on inflation before lowering interest rates. Traders expect the rupee to be range-bound in the near term, with the U.S. non-farm payrolls report due on Thursday and developments on U.S.-India trade negotiations expected to provide directional cues. At this juncture, the rupee is expected to log two-way price action with resistance pegged in the 85.45-85.50 zone, a trader at a mid-sized private bank said. Persistent dollar bids from state-run banks around that level have also prompted speculation among traders that the Reserve Bank of India may be stepping in to absorb dollar inflows.
The United States could reach a trade deal with India, President Donald Trump said on Tuesday, paving the way for the South Asian country to avoid a 26% levy that was announced on April 2 and paused till July 9. "We continue to forecast USD/INR to move lower with supportive domestic factors and a possible trade deal with the U.S., with the implicit assumption of a status quo in geopolitical conflicts," MUFG said in a note. The firm expects USD/INR to decline to 84 by the first quarter of calendar year 2026.
