The Indian rupee traded flat at 85.92 against the U.S. dollar in early trade on Thursday, July 17, as investors adopted a wait-and-watch stance amid foreign fund outflows and lingering uncertainty over the India-U.S. trade negotiations.

Forex traders noted that the rupee lacked direction during the initial trading session, mirroring cautious moves in Asian currency markets.

Key Factors Influencing the Rupee Movement

1. FII Outflows Continue:
Market participants said persistent foreign portfolio investment (FPI) outflows from Indian equities and debt markets have weighed on the rupee. With global investors shifting to safe-haven assets like the U.S. dollar amid geopolitical tensions and recession fears, emerging market currencies are under pressure.

2. Trade Deal Uncertainty:
The ongoing trade discussions between India and the U.S. remain inconclusive. President Donald Trump recently hinted at progress but also emphasized that American market access remains non-negotiable. Traders say this uncertainty over the final deal is adding to rupee’s vulnerability.

3. RBI Intervention Likely:
Dealers believe the Reserve Bank of India (RBI) has been actively intervening to prevent excessive volatility in the forex market. However, they add that the central bank may allow gradual depreciation to maintain export competitiveness.

Analyst Commentary

Rahul Agarwal, Currency Strategist at ICICI Securities, said:

“The rupee is consolidating around 85.90–86.10 range. FII outflows and lack of clarity on the India-U.S. trade deal are keeping the rupee from appreciating despite stable crude prices and decent macro data.”

Neha Batra, Senior Economist at YES Bank, added:

“Rupee movement remains sentiment-driven. Till there's a breakthrough in the India-U.S. trade pact, expect range-bound movement with a downside bias.”

Global Context

The U.S. dollar index, which tracks the greenback against a basket of six major currencies, was marginally lower at 103.28, after recent gains on the back of strong U.S. economic data and hawkish comments from the Federal Reserve.

Meanwhile, Brent crude prices stayed steady at $84.10 per barrel, offering some relief to India’s import bill, although it has had limited impact on the rupee so far due to offsetting capital outflows.

Technical Outlook

Currency analysts expect the rupee to trade within a narrow range of ₹85.80–₹86.20 per dollar in the short term unless any significant policy announcements or geopolitical events occur.

Conclusion

While the rupee is currently stable, the currency remains vulnerable to external risks, especially from foreign fund withdrawals and lack of progress on critical trade discussions. RBI’s intervention may prevent any sharp fall, but sustained appreciation is unlikely until clarity emerges on key global factors.

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