Mumbai: The Indian rupee hit a historic low of 87.29 against the US dollar on Monday, declining by 67 paise in early trade. This sharp depreciation follows fresh tariff impositions by former US President Donald Trump on imports from Canada, Mexico, and China, escalating fears of a full-blown global trade war.
Trump’s decision to levy 25% duties on Canada and Mexico, along with a 10% tariff on Chinese imports, has shaken global financial markets, leading to a surge in demand for the US dollar as investors seek safe-haven assets, forex analysts noted.
The rupee opened at 87.00 against the dollar at the interbank foreign exchange before slipping further due to sustained foreign fund outflows and the growing strength of the American currency in global markets. Weak risk appetite and increasing demand for dollars by oil importers also contributed to the currency’s decline.
On Friday, the rupee had closed at 86.62, maintaining a flat stance. According to Amit Pabari, Managing Director of CR Forex Advisors, “Financial markets are witnessing volatility as Trump’s aggressive trade policies fuel economic uncertainty. The resulting risk aversion has boosted the US dollar, pushing it towards the 109.50 mark.”
The dollar index, which measures the greenback’s performance against a basket of six major currencies, was up 1.30% at 109.77. Major global currencies, including the Euro (1.0224), British Pound (1.2261), and Japanese Yen (155.54), also weakened significantly.
Asian currencies felt the pressure as well, with the Chinese Yuan dropping to 7.3551, the Indonesian Rupiah to 16,448, and the South Korean Won to 1,470. Meanwhile, Brent crude oil prices saw a 0.71% rise, reaching USD 76.21 per barrel.
“The Reserve Bank of India (RBI) is expected to intervene to stabilize the rupee, with a trading range projected between 86.65 and 87.00 for the day,” noted Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP.
Stock markets also reacted negatively to the developments. The BSE Sensex dropped 575.89 points (0.74%) to 76,930.07, while the NSE Nifty fell by 206.40 points (0.88%) to 23,275.75.
Foreign Institutional Investors (FIIs) pulled out Rs 1,327.09 crore from the Indian equity markets on Saturday, as per exchange data. However, India’s forex reserves saw an increase of USD 5.574 billion, reaching USD 629.557 billion as of January 24, as reported by the RBI. Despite this, the reserves have been fluctuating in recent weeks, mainly due to currency revaluation and RBI’s market interventions to curb volatility.
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