The Indian rupee fell to a record low against the US dollar on Friday afternoon as worries grew over steep tariffs on Indian goods. Earlier this week, Washington raised tariffs by another 25%, taking the total duties on Indian exports to 50%. Following the steep US tariffs, the rupee slid to 87.9650 against the dollar, breaking its previous all-time low of 87.95.
Rupee slips 6% against Yuan in 4 months
The Indian rupee has dropped nearly 6% against the Chinese yuan over the past four months. On Friday, it fell to 12.3307 against the offshore yuan, extending its weekly decline to 1.2% and the monthly drop to 1.6%. Economists say this trend reflects the different ways US tariffs are affecting India and China, a Reuters report said.
Tariffs drive the gap
This week, Washington raised tariffs on Indian goods by another 25%, doubling the total to 50% tariffs. In contrast, Chinese goods face a lower 30% tariff, with harsher planned duties on hold.
Because India and China compete directly in the US market, especially in textiles, engineering goods, and chemicals, the yuan-rupee exchange rate plays a key role. A weaker rupee compared to the yuan makes Indian exports cheaper than Chinese ones, softening the impact of higher US tariffs. It could also help reduce India’s large trade deficit with China.
What does RBI say?
The Reserve Bank of India closely tracks the yuan-rupee rate. While the RBI has not publicly commented, analysts believe that the Central Bank could welcome this trend since it does not push the rupee beyond its comfort zone against the US dollar.
Dhiraj Nim, FX strategist at ANZ Bank, told Reuters that the RBI generally benefits from a weaker rupee, and its fall against the yuan is even more favorable.
This week alone, the rupee has fallen over 1% against the yuan but only 0.3% against the dollar. Importantly, it has not broken the key Rs 88 per dollar level, which traders see as a line that, if crossed, could trigger sharper losses. Bankers have said that the RBI’s active interventions have been central in keeping the rupee’s slide under control.
