The Indian rupee strengthened by 15 paise, opening at ₹87.73 against the US dollar in early trade on August 6, 2025, amid moderate support from exporters, stable oil prices, and relatively balanced foreign flows. This marginal appreciation reflects the resilient nature of the Indian economy and cautious optimism in the financial markets despite global headwinds.

A breather for the currency amid global volatility

The rupee’s gain comes at a time when global financial markets are navigating through a complex mix of interest rate expectations, geopolitical tensions, and commodity price swings. While the US Federal Reserve has adopted a more cautious tone recently, the Indian currency has remained within a narrow and controlled band, thanks to adequate foreign exchange reserves, a strong balance of payments, and limited external vulnerability.

The current exchange rate of ₹87.73 per USD is seen as favourable for importers and provides breathing room to the Reserve Bank of India (RBI) in managing inflationary pressure without disrupting trade competitiveness.

Foreign investors still cautious

According to the latest data released by Indian stock exchanges, Foreign Institutional Investors (FIIs) were net sellers of Indian equities on August 5, 2025, offloading stocks worth ₹22.48 crore. This move indicates a continued cautious approach adopted by global investors amid uncertainty around US economic data, the trajectory of Indian interest rates, and earnings season fluctuations.

FII activity, while slightly negative, is not indicative of a mass exodus, and many analysts believe these outflows are part of routine portfolio rebalancing strategies.

Domestic fundamentals remain strong

Despite minor FII pullbacks, the macroeconomic stability of India remains intact:

• GDP growth for FY26 has been retained at 6.5% by the RBI

• Inflation is well within control, hovering around the 4% mark

• Forex reserves remain robust, providing ample cover for over 10 months of imports

• Trade deficit has narrowed, driven by services exports and remittances

These factors contribute to the rupee’s resilience and investor confidence in the country’s medium-term prospects.

Market reaction and expectations

The currency appreciation is expected to provide temporary relief to import-intensive sectors like electronics, oil & gas, and chemicals. It also improves the cost structure for companies with dollar-denominated liabilities or foreign currency borrowings.

On the other hand, exporters may face margin pressures, especially in the IT, textile, and pharmaceutical sectors, if the rupee continues to appreciate sharply.

However, economists suggest the RBI may intervene if volatility increases, as the central bank prefers a stable and predictable rupee, rather than sharp movements that impact trade competitiveness.

Global context: Dollar index and oil prices

The US dollar index remained largely unchanged near the 102.40 level, as traders await further cues on interest rate decisions from the US Federal Reserve and inflation data from the Eurozone. Meanwhile, crude oil prices are stable around $81 per barrel, offering comfort to India’s current account position.

The rupee’s gains are also supported by moderate oil import bills, improving the trade balance and reducing pressure on external accounts.

Forward outlook: Stability expected with limited gains

Currency strategists expect the rupee to trade in the 87.50–88.10 range in the near term. While short-term appreciation may continue due to:

• Strong export performance

• Mild FII flows

• Subdued dollar movement globally

…it is also likely to be capped by RBI’s intervention and seasonal import demand.

Market experts believe volatility will remain low, especially with the Monetary Policy Committee (MPC) keeping the repo rate unchanged at 5.5% and projecting a steady inflation trajectory.

What it means for investors and businesses

For investors:

• Currency stability provides predictability in equity and debt markets

• Rupee appreciation could lead to short-term corrections in IT and pharma stocks with large overseas revenue

• Import-heavy sectors may benefit, including automobile and capital goods companies

For businesses:

• Exporters must hedge currency risk actively, given the possibility of further rupee gains

• Importers, especially SMEs, can take advantage of better exchange rates to negotiate lower prices with global suppliers

• Foreign travel and overseas education become marginally more affordable for individuals

Conclusion

The 15 paise rise in the rupee to ₹87.73 per USD on August 6 reflects India’s improving macroeconomic footing and investor confidence, despite temporary FII outflows of ₹22.48 crore. As the RBI continues to manage liquidity and inflation carefully, the rupee is expected to remain range-bound and relatively stable through the rest of the fiscal year.

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