MUMBAI, May 27 (Reuters) - The Indian rupee weakened modestly on Tuesday, weighed down by month-end dollar demand from local companies and foreign banks, likely on behalf of custodial clients, while a fall in equities also dented sentiment.

The rupee was down 0.2% at 85.27 as of 10:30 a.m. IST.

Sign up here.

India's benchmark equity indexes fell about 0.6% in early trading, tracking losses in Asian stocks with MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) , opens new tab slightly in the red.

Importers have been covering dollar liabilities regularly as there is some concern that a modest reversal in the dollar's trajectory could push the rupee towards 86, a trader at a Mumbai-based bank said.

The dollar-rupee daily fix, meanwhile, was quoting at a slight discount, the trader said, signalling heightened appetite to sell dollars at the daily reference rate published by the country's central bank.

Asian currencies were mixed with the offshore Chinese yuan down 0.1% at 7.1839 while the Korean won rose 0.2%. The dollar index was a tad higher at 99.1.

Persistent weakness in the dollar - to the tune of about 9% against major peers over 2025 so far - has been a tailwind for emerging market currencies across the board.

Worries over U.S. trade policies and fiscal health have dented investor appetite for U.S. assets with analysts pointing out a broad pickup in hedging against dollar weakness.

While the rupee has underperformed its regional peers over May, traders reckon that the currency should hold a slight upward bias in the near term.

"We see USD/INR trading in the 84-86 range in the near term as markets await the India-U.S. trade deal," Kotak Mahindra Bank said in a note.

https://www.reuters.com/world/india/rupee-slips-month-end-importer-dollar-bids-weak-equities-2025-05-27/