Rupee Dips Amid Strong Dollar, India-US Trade Deal Uncertainty

The Indian rupee edged down by one paisa to 88.75 against the U.S. dollar in early trade on Tuesday, reflecting continued pressure from a strong greenback and lingering doubts over the India-US trade negotiations, according to foreign exchange traders.

The currency initially opened slightly stronger at 88.72, but quickly gave up gains to trade lower. On Monday, the rupee had gained 5 paise to close at 88.74 against the dollar.

The dollar index, which measures the currency against a basket of six major currencies, was up 0.06% at 97.86, signaling broader strength in the greenback. Meanwhile, Brent crude rose 0.34% in futures trading to USD 65.69 per barrel, adding to market volatility.

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Trade Deal Concerns and Capital Outflows

External Affairs Minister S. Jaishankar noted that any India-US trade agreement must respect New Delhi’s “red lines,” highlighting ongoing challenges in finalizing a pact. “There are issues between India and the US, many linked to the inability to firm up the proposed trade deal. Some matters are negotiable, others are not,” he said, underscoring the complexity of negotiations.

Forex traders also attributed rupee weakness to continued foreign capital outflows and geopolitical tensions, which have prompted investors to favor the dollar.

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Equity Markets Open Higher Despite FII Selling

Domestic equities opened on a positive note, with the BSE Sensex rising 93.83 points (0.11%) to 81,883.95 and the Nifty 50 gaining 46.35 points (0.18%) to 25,124.00.

However, foreign institutional investors (FIIs) remained net sellers, offloading Rs 313.77 crore in equities on Monday, reflecting cautious sentiment amid macroeconomic and global uncertainties.

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Services Sector Shows Moderation

Economic data indicates a slight cooling in India’s services sector. The HSBC India Services PMI Business Activity Index dropped to 60.9 in September from a 15-year high of 62.9 in August, signaling slower expansion in new business and overall activity. Analysts attributed the moderation to competitive pressures and cost-control measures across the sector.

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Market Outlook

Currency experts advise caution for businesses and investors exposed to foreign exchange risk. “The rupee is likely to remain sensitive to global dollar movements, crude oil prices, and developments in the India-US trade dialogue,” said Ramesh Patel, senior currency strategist at LKP Securities.

With ongoing macroeconomic adjustments, FII flows, and trade negotiations in focus, market participants are closely monitoring both domestic and international developments for signals on the rupee’s near-term trajectory.