The rupee closed at 85.5075 against the U.S. dollar, down 0.2% from its close at 85.36 in the previous session.
The dollar index rose to an over one-week high of 100.48 before slipping back below the 100-handle while Asian currencies were trading mixed.
The offshore Chinese yuan was little changed at 7.19 while the Malaysian ringgit led losses among Asian peers, with a 0.5% decline.
Traders also pointed to routine dollar bids from importers weighing on the rupee.
“From a technical standpoint, the USD/INR pair remains in a consolidation zone with resistance near 85.70-85.90 levels and strong support of 84.90-85.10 levels,” said Amit Pabari, managing director at FX advisory firm CR Forex. “A breach on either side could pave a sharp movement in that direction,” Pabari added. The U.S. court decision to halt reciprocal tariffs provided some relief to the greenback which had otherwise struggled this year due to trade uncertainty.
The dollar strengthened against safe havens like the Swiss franc and Japanese yen as well.
“We think the combination of this tariff news and a slightly hawkish FOMC minutes (almost all participants commented on the risk that inflation could prove to be more persistent than expected), can help the dollar stay bid in the near term,” ING said in a note.
Minutes of the Federal Reserve’s May policy meeting also pointed out that the recent sharp decline in the dollar was primarily driven by increased foreign exchange hedge ratios, rather than significant foreign selling of U.S. assets.
