MUMBAI, August 8 (Reuters) - The Indian rupee's initial rise on Friday was capped by dollar demand from importers and short-term speculators, who were wary of the overhang from U.S. trade tensions.

The rupee had rose to 87.56 at open and hit an intraday high of 87.5350, building on the momentum from unwinding of long dollar in the non-deliverable forward (NDF) market.

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However, bids for dollars surfaced soon after, halting the recovery and keeping USD/INR anchored, traders said.

The rupee was quoting at 87.61 to the U.S. dollar at 10:42 am IST, up from Thursday's close of 87.7025.

"There is obviously a lot of uncertainty around the U.S. tariffs," said a currency trader at a private-sector bank.

"You likely will have importers err on the side of caution and take hedges. For speculators, it is either to buy (USD/INR) or remain on the sidelines."

Flows remain skewed and dips in USD/INR will be bought, he added.

The rupee has come under growing pressure given the trade tensions with the United States. India now finds itself among the hardest-hit countries in President Donald Trump's trade offensive following the announcement of an additional 25% tariff on Indian goods this week.

The move places India on par with Brazil in facing the steepest import duties currently levied by the U.S. The escalation is particularly notable given that India was once considered a strong contender for an early and favourable trade deal with Washington.

The latest measures have unsettled markets and raised concerns that the ongoing friction could impact capital flows and investor sentiment toward Indian assets.

Foreign investors sold nearly $600 million in Indian equities on Thursday, preliminary exchange data showed, underscoring the cautious sentiment.

The Reserve Bank of India has intervened to defend the 87.95 all-time high level on USD/INR, with traders noting action in both spot and NDF markets. This helped prevent a larger slide in the rupee.

https://www.reuters.com/world/india/rupee-recovery-hits-resistance-corporates-speculators-2025-08-08/