MUMBAI, May 29 (Reuters) - The Indian rupee weakened on Thursday, weighed down by a broad rebound in the dollar after a U.S. federal court blocked most of President Donald Trump's "reciprocal tariffs" from taking effect.
The rupee was at 85.5325 per U.S. dollar as of 11:30 a.m. IST, down 0.2% on the day. Asian currencies were down between 0.1% to 0.6% while the dollar index rose past the 100 handle.
However, the benchmark BSE Sensex and Nifty 50 equity indexes were little changed, lagging behind gains in regional peers as markets cheered the court ruling to block Trump tariffs.
A U.S. trade court said in its ruling that the country's Constitution gives Congress exclusive authority to regulate commerce with other countries that is not overridden by the president's emergency powers to safeguard the U.S. economy.
The Trump administration has appealed the ruling.
Analysts pointed out that the market was showing a knee-jerk reaction to the ruling, which blocked tariff policies that had weighed heavily on the dollar and boosted emerging market currencies, but many added that the initial reaction may lack follow through.
"It remains to be seen if this ruling is a game-changer because the Supreme Court has a conservative majority influenced by Trump’s appointments," DBS said in a note, adding that "USD is not out of the woods," as concerns about U.S. fiscal health continue to linger.
Traders also pointed to dollar bids from foreign banks and local companies weighing on the rupee.
It seems like "two-way price action will persist unless it (USD/INR) moves out of the 84.80-86 range," a trader at a Mumbai-based bank said.
Dollar-rupee forward premiums fell after markets pared hopes of Federal Reserve rate cuts, pushing near-tenor Treasury yields higher after the release of the minutes of the Fed's May policy meeting.
The 1-year dollar-rupee implied yield fell 4 bps to 1.96%, its lowest since December 2024.
Reporting by Jaspreet Kalra; Editing by Nivedita Bhattacharjee
Source: Reuters