Indian Rupee Dips Alongside Asian Peers; Tariff Deadline Looms

The Indian rupee weakened slightly on July 2, 2025, declining by approximately 0.2% to 85.6850 against the U.S. dollar by mid-morning. This dip mirrors modest declines across other Asian currencies, as market participants remain cautious ahead of a looming U.S. tariff deadline set for July 9, 2025.

The uncertainty surrounding potential trade policy changes under U.S. President Donald Trump, combined with expectations for upcoming U.S. economic data, has kept investors on edge.

The rupee’s movement aligns with broader regional trends, with currencies like the Korean won, Malaysian ringgit, and Thai baht also experiencing declines of around 0.3%. The U.S. dollar index, a measure of the dollar’s strength against major currencies, rose marginally by 0.1% to 96.7, bolstered by stronger-than-expected U.S. economic indicators. These figures have reinforced the U.S. Federal Reserve’s cautious approach to interest rate cuts, with Fed Chair Jerome Powell emphasizing a need to assess the inflationary impact of proposed tariffs before making policy decisions.

Traders anticipate the rupee will remain within a tight trading range in the near term, with resistance levels around 85.45-85.50. Some market observers noted consistent dollar purchases by state-run banks, sparking speculation that the Reserve Bank of India may be intervening to manage dollar inflows.

Meanwhile, optimism persists about a potential U.S.-India trade agreement, which could shield India from a proposed 26% tariff levy. Discussions between the U.S. and India are ongoing, with President Trump indicating progress toward a deal that could stabilize the rupee’s outlook.

Looking ahead, the U.S. non-farm payrolls report, due on July 3, 2025, is expected to provide further clarity on the Federal Reserve’s rate path, potentially influencing the rupee’s trajectory. Analysts from MUFG project the USD/INR exchange rate could decline to 84 by early 2026 if trade negotiations succeed and domestic economic factors remain supportive. However, persistent global trade uncertainties may continue to pressure the rupee in the short term.

Published in SouthAsianDesk, July 2nd, 2025

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