Rupee logs biggest single-day drop in 3 weeks: Is the domestic currency poised for further weakness? Experts weigh in

The Indian rupee logged its worst day in three weeks on Tuesday, weighed down by weakness in regional peers, importer hedging and dollar demand related to the expiry of non-deliverable forward contracts.

The rupee ended at 87.21 to the U.S. dollar, down from 86.6950 in the previous session. The domestic unit slipped 0.6% on the day, its biggest single-day fall since February 5.

The rupee pared some losses as the central bank likely intervened to support the currency after it dropped due to demand for the greenback related to derivatives expiry

“You have dollar demand on the back of maturity of NDF positions, importer hedging and weak Asian cues – all factors stacked up against the rupee, providing very little room for appreciation,” a forex trader at a private sector bank said.

Still, expectations of strong interventions by the Reserve Bank of India have reduced speculative positioning against the rupee, the trader said.

The dollar index recovered to 106.79 after falling to a more than two-month low of 106.35 on Monday.

Asian currencies were mostly lower and risk appetite soured as worries over U.S. tariffs returned.

U.S. President Donald Trump restricted Chinese investments in strategic areas and said Canada and Mexico tariffs will start next week.

Investors had largely hoped that negotiations would forestall the threat after Trump had previously agreed to a 30-day pause on the tariffs.

Foreign investors have sold Indian shares worth nearly $3 billion so far in February.

Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities:

“Rupee traded very weak at 87.11, down 0.505Rs, as FII sell-off continued and crude oil prices remained elevated amid US tariffs on Iran, which pushed oil demand higher. The dollar index at 106.65$ also added to the pressure on the rupee.

With continued capital outflows and rising crude prices, rupee weakness may persist. Support is seen near 87.45, while resistance remains at 86.85. Market focus remains on global risk sentiment, oil price trends, and central bank policy signals.”

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