Foreign banks drive dollar demand amid tariff fears
Traders cited strong buying from foreign banks amid speculation about ongoing tariff pressures on India from the US.
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The “spike on USD/INR was caused by worries of higher tariffs on India but state-run banks stepped in over 88.30 to cap losses, most likely on behalf of the Reserve Bank of India,” a senior trader at a bank said.
Merchant flows are relatively muted today so activity is skewed towards the dollar buying side, the trader added.
Rupee likely to touch 89 by early 2026, says MUFG
MUFG said the rupee could weaken to 89 by the first quarter of calendar year 2026 under the assumption that the steep tariffs remain for now but are eventually lowered to 25% sometime next year.
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Foreign portfolio investors have continued to withdraw from Indian equities with net sales of $1.4 billion so far in September, taking the total outflow so far this year to over $16 billion.