The Indian rupee strengthened on Friday, gaining 0.2% to close at 87.4250 against the US dollar. This comes after a week of weakness, driven by global trade war fears and persistent foreign portfolio outflows, which pushed the rupee to its all-time low past the 87 handle on Thursday.
The Reserve Bank of India (RBI) cut its key interest rate for the first time in nearly five years, signaling a less restrictive policy approach aimed at stimulating the sluggish economy. Expectations of a rate cut had weighed on the rupee earlier in the week.
Despite the rate cut, the rupee's gains were limited. Asian currencies were mostly higher on Friday, and the RBI likely intervened to support the rupee ahead of the policy decision. The dollar-rupee pair "found support from the Governor's statement that the RBI FX intervention policy will continue to focus on smoothening excessive and disruptive volatility," said Sameer Karyatt, executive director and head of trading at DBS Bank India.
In his first public remarks on the currency, Governor Sanjay Malhotra reiterated the RBI's long-held position that interventions are only intended to smoothen "excessive and disruptive volatility."
The rupee had declined to its all-time low of 87.5825 on Thursday after breaching the 87 handle on Monday following the announcement of US tariffs on Canada, Mexico, and China. While tariffs on Canada and Mexico were subsequently delayed, the rupee was unable to claw back its losses as traders positioned for a rate cut by the RBI and as foreign selling of Indian stocks persisted.
Overseas investors have net sold about $9.5 billion of Indian stocks over 2025 so far.