Softer crude oil prices provide relief
Global crude prices declined, offering the rupee some respite after recent lows. Brent crude futures dropped 0.97% to $72.53 per barrel as traders assessed the impact of fresh US tariffs, which may dampen global economic activity and energy demand.RBI steps in to limit volatility
Traders noted that the central bank likely intervened in the forex market on Thursday (July 31) to prevent a sharper slide in the rupee. The local unit had dropped to a record low of 87.75 but recovered to close at 87.65 after the RBI reportedly sold dollars to support the currency.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said, “On Thursday (July 31), the rupee made a low of 87.75 but closed at 87.5950 as RBI stepped in to cool off the market.” He added that with continued RBI support, the rupee could approach 87.00 in the coming sessions, though the situation demands close monitoring.
US tariffs spark fresh risk-off sentiment
Despite the recovery, sentiment remains fragile. The US government’s decision to impose a 25% tariff on Indian exports, effective August 1, has raised fresh concerns among investors. The move has triggered fears of further depreciation as global risk sentiment remains cautious.
“The dollar headed for its best week in almost three years as President Trump imposed new tariffs on multiple trading partners,” Bhansali added. The dollar index, which measures the greenback’s strength against six major currencies, edged up 0.07% to 100.03.Weak equities, FII outflows add pressure
Indian equity markets extended losses in morning trade. The Sensex fell 145.71 points to 81,039.87, while the Nifty dropped 64.70 points to 24,703.65. Foreign institutional investors (FIIs) sold equities worth ₹5,588.91 crore on Thursday (July 31), further pressuring the rupee.
Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, expects the rupee to remain under pressure with a broad trading range between 87.25 and 88.00.
Wider fiscal deficit keeps macro outlook in focus
Adding to the cautious mood, India’s fiscal deficit touched 17.9% of the full-year target at the end of June, according to the Controller General of Accounts. The deficit widened to ₹2.80 lakh crore in the first quarter of FY26, up from 8.4% of the budget estimate for the same period last year.
Outlook
The rupee’s near-term path will depend on global developments, crude trends, and the RBI’s actions. While lower oil prices and RBI support have offered relief for now, traders remain alert to external shocks and capital market flows that could test the currency’s resilience.
–With PTI inputs
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