Rupee Drops Below ₹87 as Trade Uncertainty Mounts

Rupee Drops Below ₹87 as Trade Uncertainty Mounts

On Wednesday, July 30, 2025, the Indian rupee weakened to ₹87.13 per U.S. dollar, marking its lowest level in over four months amid escalating concerns over U.S. tariff threats targeting Indian exports. By mid-session it was trading around ₹87.11, down 0.3% on a day filled with volatility.

RBI Steps In With Dollar Sales

Traders reported that the Reserve Bank of India (RBI) likely intervened in forex markets via dollar sales carried out by banks on its behalf. Though the interventions were intermittent and modest, they helped temper the rupee’s downward momentum from breaching deeper losses.

Key Drivers Behind the Rupee’s Decline

1. U.S. Tariff Risks

U.S. President Donald Trump suggested imminent 20–25% tariffs on certain Indian exports, creating uncertainty that spooked currency markets.

2. Foreign Portfolio Outflows

India saw persistent equity and bond sell-offs by foreign investors, with net outflows approaching $700+ million in recent days alone, weakening confidence in local assets.

3. Month-End Import Dollar Demand

End-of-month pressure from importers needing dollars pushed the rupee lower, compounding trade and financial stress.

4. Strong Global Dollar

The U.S. dollar index surged as the euro dipped amid a U.S.–EU trade agreement seen favoring Washington, reinforcing global strength in the dollar.

Technical & Outlook Perspective

According to historical pricing records, on July 30, 2025, the USD/INR mid‑rate averaged ~₹87.0657, closing around ₹87.0732 with intraday highs near ₹87.1044—underscoring local stresses in global context. Meanwhile, platforms like Wise reported exchange rate highs around ₹87.28 for the day and noted weekly swings between ₹86.27–₹87.28.

Despite near‑term pressures, institutions like BofA Global Research remain optimistic on longer‑term rupee appreciation, forecasting a recovery toward ₹84/USD by December 2025, citing stable domestic fundamentals, likely foreign equity inflows, and easing oil prices.

Analysts from Barclays, on the other hand, see the current depreciation as “overdone” in the short term, suggesting limited downward potential now that the currency is approaching the ₹86.50–87 resistance band.

Significance & Key Takeaways

• ₹87 per U.S. dollar is a psychologically and technically significant barrier. Breaking above it reflects heightened market vulnerability.

• RBI intervention offered limited relief—measured dollar sales helped stabilise losses but aren’t intended as long-term fixes.

• Persistent U.S.–India trade tensions, foreign capital flight, and import-led dollar demand remain central downside risks.

• Outlook hinges on progress in bilateral trade talks, stability in foreign investment flows, and trajectory of global commodity prices.

Summary Table

Driver	Impact on Rupee
U.S. tariff uncertainty	Increased selling pressure
Foreign portfolio outflows	Capital flight
Month-end importer demand	Currency weakened
RBI dollar intervention	Limited buffer
Strong global dollar & euro slide	Strengthening USD

Final Word

The rupee’s dip below ₹87 reflects a confluence of external shocks and domestic capital flow shifts. While RBI interventions have provided short-term relief, structural uncertainties—including U.S. tariff threats and global dollar strength—continue to weigh on the currency. The longer-term outlook remains cautiously optimistic, but hinges critically on trade negotiations, foreign investor sentiment, and commodity price movements.