Mumbai, Aug 29 (PTI) The rupee depreciated 18 paise to 87.76 against the US dollar in early trade on Friday, weighed down by persistent foreign fund outflows and month-end dollar demand.

Forex traders said the rupee is under persistent pressure as the weakness from Trump tariffs was being countered by a softer US dollar, giving the local currency some much-needed breathing space.

At the interbank foreign exchange market, the rupee opened at 87.73 against the US dollar, then fell to 87.76, registering a decline of 18 paise over its previous close.

On Thursday, the rupee rose by 11 paise to close at 87.58 against the US dollar.

"Market sentiment remains fragile due to the impact of US tariffs and selling by FPIs to the tune of Rs 34,733 crore of Indian equities in August 2025," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.

The US tariffs are expected to weaken Indian exports to the US and deepen the trade deficit and put strain on the rupee, further pressurising import costs and thus fueling domestic inflation, Bhansali said.

The rupee opened a tad weaker and is likely to stay in the range of 87.40-87.90 for the day, with a close watch on RBI selling dollars to protect the rupee.

The Reserve Bank of India, in its latest bulletin on Thursday, said persisting uncertainties related to the US trade policies pose downside risk to the overall demand in the Indian economy, while the inflation outlook for the near-term has become more benign than anticipated earlier.

Meanwhile, the government is working on extending support measures for exporters, such as the rollout of export promotion missions, and a moratorium on loans to help them insulate from the impact of the US's 50 per cent tariffs on Indian goods, according to an official.

The government official also said this is a wake-up call and an opportunity to diversify the export basket.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.18 per cent to 97.99.

Brent crude, the global oil benchmark, was trading 0.66 per cent lower to USD 68.17 per barrel in futures trade, On the domestic equity market front, the Sensex climbed 197.11 points to 80,277.68, while the Nifty was trading up 63.45 points to 24,564.35.

Foreign Institutional Investors offloaded equities worth Rs 3,856.51 crore on Thursday, according to exchange data. PTI DRR DR DR

Exchange rate pressure from foreign outflows and trade tariffs prompts central bank intervention and export support measures. Persistent currency weakness is attributed to sustained foreign portfolio investor selling and month end dollar demand compounded by tariff related external demand risk, likely worsening the trade balance and import costs and adding inflationary pressure. Authorities are responding through RBI market intervention to stabilize the exchange rate and government export support measures, including promotion initiatives and temporary credit relief, while urging export diversification.