Rupee at record low, crosses 87 per US dollar for the first time as Trump tariffs rattle Asian currencies
- The dollar index was up 0.3% at 109.8, while Asian currencies weakened, with the offshore Chinese yuan down 0.5% at 7.35 per US dollar.
The Indian rupee opened at a record low on Monday, breaching 87 per US dollar for the first time, as Asian currencies slumped amid a surge in US dollar after US President Donald Trump imposed tariffs on the country’s largest trading partners.
The rupee dropped 0.5% to a low of 87.07 per dollar in early trade, as against its previous close of 86.61/USD.
The dollar index was up 0.3% at 109.8, while Asian currencies weakened, with the offshore Chinese yuan down 0.5% at 7.35 per US dollar, Reuters reported.
Over the weekend, Donald Trump imposed 25% tariffs on Mexican and most Canadian imports, and 10% on goods from China, starting on Tuesday. Mexico and Canada - the US' top two trading partners - retaliated while China said it would take unspecified countermeasures.
Asian currencies took a plunge after Trump's tariffs announcement. The offshore Chinese yuan declined 0.54% to 7.3585 to the US dollar. The currency declined 1% last week.
A surge in crude oil prices also pressurized the local currency. Crude oil prices surged on worries over escalating trade war.
Brent crude oil gained 0.73% to $76.22 a barrel, while the US West Texas Intermediate (WTI) crude futures rose 1.74% to $73.79.
“Despite domestic efforts, external factors will continue to influence the rupee’s path. Global risk sentiment, crude oil prices, and US Federal Reserve policy decisions—especially if interest rates remain elevated—will play a pivotal role in determining the rupee’s movement. Given these dynamics, volatility in USD/INR remains likely, with the pair expected to trade within the 86.30–87.10 range in the near term,” said Amit Pabari, MD, CR Forex Advisors.
Indian stock market falls
On the domestic front, the Indian stock market opened sharply lower on Monday, dragged by weak global market cues.
The Sensex was trading 439.36 points, or 0.57%, lower at 77,066.60, while the Nifty 50 was down 152.15 points, or 0.65%, at 23,330.00.
The selloff was sharp in the mid and small-cap segments as the BSE Midcap and Smallcap indices plunged over one per cent each.
Budget impact on rupee?
In the Union Budget 2025-2026, the Indian government’s decision to lower the fiscal deficit target to 4.4% of GDP for FY 2025-26, down from 4.8% in the previous fiscal year, signals a strong commitment to fiscal prudence.
“This disciplined approach is expected to enhance investor confidence in the rupee by curbing borrowing needs, easing pressure on bond yields, and maintaining liquidity control. Moreover, the budget’s ambitious ₹10.18 lakh crore capital expenditure plan, coupled with reforms like allowing 100% FDI in the insurance sector, could attract robust foreign inflows, providing further support to the rupee,” Pabari said.
While tax relief measures—such as raising the tax exemption limit to ₹12 lakh — and ₹1.5 lakh crore in interest-free loans for state capital expenditure may introduce some fiscal strain, the overall deficit reduction reinforces optimism for the rupee’s trajectory, he added.
(With inputs from Reuters)
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