MUMBAI: The Indian rupee climbed on Friday, as a key U.S. inflation data came in line with expectations and reinforced bets that the Federal Reserve will cut interest rates next week.
The rupee ended 0.19% up at 88.2750 on Friday from the close of 88.4425 on Thursday - a record closing low.
Friday’s move ended a volatile week, during which the rupee stayed largely below the 88-mark, weighed down by persistent portfolio outflows and U.S. tariff-related uncertainties.
The local unit has been under steady pressure since the U.S. imposed additional punitive tariffs on Indian imports last month over the purchase of Russian oil.
To curb the impact of the levies, Indian Prime Minister Narendra Modi rolled out consumption tax cuts. Both U.S. and India are also looking at resuming negotiations to address the trade barriers.
“The rupee…remains caught between domestic trade and capital pressures and global dollar moves shaped by U.S. inflation and Fed policy,” said Abhishek Goenka, founder and CEO of IFA Global.
India rupee sinks to record low, US tariffs keep outlook fragile
While the Indian central bank has been intervening through state-run banks to smooth volatility, it is not defending a specific level, leaving the currency outlook fragile, Goenka said.
Thursday’s U.S. inflation data, seen as supportive of rate cuts, prompted traders to price a 90% chance of two more moves this year. The Fed last lowered rates in December 2024.
Strengthening prospects of U.S. rate cuts has propped up currencies across Asia, with the Malaysian ringgit and the Indonesian rupiah leading the gains, as lower borrowing costs weaken the dollar and draw more money into high-yielding emerging markets.
The U.S. dollar index was up 0.15% as of 1535 IST.
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