Indian rupee logs worst day in 2 weeks on dollar strength, position unwinding

MUMBAI: The Indian rupee logged its steepest fall in two weeks, pressured by a recovery in the US dollar index and as traders unwound long positions on the local unit after it failed to climb above a key level.

The rupee ended 0.3% down at 85.42, against 85.1875 at previous close.

The Indian currency struggled to rise above 85 per dollar this week, which led “rupee bulls” to close their long-term positions on the rupee, two traders said.

Some traders also cited the attack in India’s Jammu & Kashmir territory as a factor underpinning the dollar/rupee.

Most Asian currencies declined following the dollar index’s 1.5% surge on Tuesday after US President Donald Trump assured markets he had no plans to dismiss Federal Reserve Chair Jerome Powell.

The dollar was also buoyed by US Treasury Secretary Scott Bessent, who expressed optimism about a de-escalation in US-China trade tensions.

Dollar demand was supported by short-covering and bargain-hunting activities, said Dilip Parmar, a foreign exchange analyst at HDFC Securities.

The dollar/rupee pair faces resistance at 85.92 and support at 85.03, he said.

The dollar had been on a significant downtrend before Tuesday’s rally, driven by concerns over the impact of Trump’s trade policies on the US economy and assets.

“We could witness a period where the dollar is tossed around by headlines of Fed independence risk and market-friendly news on US tariff policy,” ING Bank said in a note.

The balance of risks remains skewed to the downside for the dollar in the near term, it said.