Rupee Opens Higher at 88.38/$, Rebounds from Record Lows Amid Fed Rate Cut Bets

The Indian Rupee opened marginally stronger on Friday, recovering slightly from its record low in the previous session, even as the U.S. dollar remained firm on growing expectations of a Federal Reserve rate cut.

Rupee Shows Minor Recovery Amid Persistent Dollar Strength

According to Bloomberg data, the domestic currency began the day at 88.38 against the greenback & now trading at 88.3034, six paise stronger than Thursday’s close. However, despite the minor rebound, the rupee has depreciated 3.24% so far in 2025, making it the weakest performer among Asian currencies.

On Thursday, the rupee had slipped to a new low of 88.44 due to persistent demand for dollars from government defence purchases, foreign portfolio investors (FPIs), and oil importers. Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, noted that heavy U.S. tariffs are putting additional pressure on both the rupee and the overall investment environment.

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Bhansali added that the Reserve Bank of India (RBI) has been actively intervening in the foreign exchange market to slow down the rupee’s fall but is not attempting to reverse its direction. “The currency pair may consolidate for a few days with upward risks intact unless trade tensions ease,” he said. Some relief could emerge if global trade talks progress, though momentum currently continues to support the dollar.

U.S. Inflation Data Boosts Dollar, Impacting Rupee and Global Markets

The dollar index, which measures the U.S. dollar against a basket of six major global currencies, was up 0.10% at 97.64. The rise came after U.S. consumer inflation data showed core CPI increased by 0.3% in August, while headline inflation rose by 0.4%, its highest monthly jump of 2025. The data strengthened bets on an imminent Fed rate cut.

Analysts’ Outlook: Sentiment-Driven Decline but Limited Downside for Rupee

Despite the rupee’s recent weakness, analysts believe the downside from current levels is limited. They argue that the decline is largely sentiment-driven due to U.S. tariffs rather than any structural deterioration in India’s fundamentals. The brokerage suggested the rupee may even approach undervaluation following its steep fall in August.

Market participants now await key economic data, including Japan and U.K. industrial production figures, U.K. GDP and trade data, and consumer sentiment from the University of Michigan. In India, investors are watching August inflation numbers and the upcoming foreign exchange reserve report.

Meanwhile, global crude oil prices edged lower on concerns about weakening U.S. demand and oversupply. Brent crude is trading at $65.900 per barrel, down 0.53%, while WTI fell around 0.90% to about $61.81 per barrel.

Conclusion

After a steep decline, the rupee's tiny recovery on Friday provided some short-term respite, but unless trade tensions subside, the odds are still tilted towards further weakening. Future economic statistics and international monetary policy cues, according to market observers, will be crucial in deciding the domestic currency's next course.