Positive Start to the Week
On Monday, June 2, 2025, the Indian rupee appreciated by 20 paise, closing at 85.38 against the US dollar. This upward movement was attributed to a combination of a weaker dollar and modest portfolio inflows. The rupee’s strength was further supported by inflows linked to changes in a global equity index and broad weakness in the dollar, which fell below the 99 level.
Influence of Global Factors
The dollar’s decline was influenced by renewed concerns over U.S.-China trade tensions, following U.S. President Donald Trump’s accusations against China for breaching a mutual tariff rollback agreement. Trump also announced plans to double tariffs on imported steel and aluminium starting Wednesday. These developments weighed on the dollar, providing a tailwind for the rupee.
Market Sentiment and RBI’s Upcoming Policy Decision
Despite global trade tensions, India expects only a minor impact, according to its federal steel minister. Analysts noted that the escalating U.S.-China confrontation and potential U.S. ‘revenge tax’ on foreign investors are pressuring the dollar. Domestically, attention shifts to the Reserve Bank of India’s monetary policy decision on June 6, where a 25 basis-point rate cut is anticipated, marking the third such cut.
Outlook for the Rupee
The rupee’s appreciation on Monday provided a positive start to the week. However, market participants remain cautious, closely monitoring global developments and the RBI’s upcoming policy decision for further cues. The rupee is expected to trade in a range of 85.00 to 85.60, with exporters and importers advised to hedge their positions accordingly.
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