Rupee dives 35 paise to 88.20 against US dollar

Mumbai, Sep 18: The rupee depreciated 35 paise to close at 88.20 against the US dollar on Thursday, as a strengthening greenback against major crosses overseas sapped investors’ risk appetite amid global trade uncertainties.

The domestic unit remained under pressure on worries over US tariffs on India and sustained foreign fund outflows, forex traders aid.

Traders also assessed the US Fed’s indication that it will steadily lower borrowing costs for the rest of the year, they added.

“The rupee’s four-day rally hit a snag, mirroring the weakness in regional currencies. The dollar rebounded sharply after the Fed’s 25-basis-point rate cut, especially as the ‘dot plot’ suggests two more cuts are on the table by late 2025,” Dilip Parmar - Senior Research Analyst, HDFC Securities, said.

At the interbank foreign exchange, the rupee opened at 87.93 against the US dollar and touched an intra-day low of 88.16 before ending the session at 88.20, down 35 paise from its previous close.

On Wednesday, the rupee appreciated 24 paise to close at 87.85 against the US dollar.

“The Indian rupee declined sharply on hawkish Fed and a bounce back in the US dollar. Fed cut interest rates by 25 bps, in line with estimates. It sees two more 25 bps rate cuts in 2025 and just one 25 bps rate cut in 2026.

“Fed Chair Jerome Powell does not see elevated financial risks from tariffs. However, he raised downside concerns over labour market and GDP growth,” Anuj Choudhary, Research Analyst, Currency and commodities, Mirae Asset ShareKhan, said.

Choudhary added that positive domestic markets and expectations of fresh FII inflows may also support the rupee. However, any recovery in the US dollar and/or US treasury yields may cap sharp upside.