The rupee ended 0.3% down at 85.42, against 85.1875 at previous close.
The Indian currency struggled to rise above 85 per dollar this week, which led “rupee bulls” to close their long-term positions on the rupee, two traders said.
Some traders also cited the attack in India’s Jammu & Kashmir territory as a factor underpinning the dollar/rupee.
Most Asian currencies declined following the dollar index’s 1.5% surge on Tuesday after U.S. President Donald Trump assured markets he had no plans to dismiss Federal Reserve Chair Jerome Powell.
The dollar was also buoyed by U.S. Treasury Secretary Scott Bessent, who expressed optimism about a de-escalation in U.S.-China trade tensions. Dollar demand was supported by short-covering and bargain-hunting activities, said Dilip Parmar, a foreign exchange analyst at HDFC Securities. The dollar/rupee pair faces resistance at 85.92 and support at 85.03, he said.
The dollar had been on a significant downtrend before Tuesday’s rally, driven by concerns over the impact of Trump’s trade policies on the U.S. economy and assets.
“We could witness a period where the dollar is tossed around by headlines of Fed independence risk and market-friendly news on U.S. tariff policy,” ING Bank said in a note.
The balance of risks remains skewed to the downside for the dollar in the near term, it said.
