The Indian rupee fell to a more than two-week low on Tuesday, weighed down by a weaker yuan and corporate hedging demand, while forward premiums eased on rising U.S. bond yields.
The rupee closed at 86.2650 against the U.S. dollar, down 0.5% on the day. The currency hit a low of 86.29 during the session, its lowest since March 21.
The onshore Chinese yuan declined 0.4% to 7.33 on Tuesday after the country's central bank set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at the weakest level since September 2023.
Asian currencies weakened, with the Indonesian rupiah hitting a record low as traders returned from an extended break.
The Indian rupee also came under pressure from importer hedging and broader regional weakness, a trader at a state-run bank said. Importer dollar bids were "quite strong," towards the close of the session, the trader added.
After days of tariff-driven volatility, global equities found some breathing room on Tuesday, with India’s benchmark Nifty 50 closing up about 1.7%.
European stock indexes were in the green as well while futures also pointed to a positive start for US stocks.
"If equities do find a bit of respite, the dollar could remain offered today alongside JPY and CHF," ING Bank said in a note.
Although U.S. President Donald Trump "has given little signs of scaling back protectionism, and there is a risk that markets are again erring on the side of optimism," the note added.
Meanwhile, dollar-rupee forward premiums declined pressured by a rise in U.S. bond yields. The 1-year implied yield was down 7 basis points at 2.33%.
Investors now await the Reserve Bank of India's policy decision due at 10:00 a.m. IST on Wednesday. The central bank is widely expected to cut policy rates by 25 basis points.
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