MUMBAI: The Indian rupee hit a lifetime low of 87.95 against the US dollar in early trade on Tuesday as US President Donald Trump threatened higher tariffs on Indian goods but recovered as the Reserve Bank of India (RBI) sold dollars to support it.
The rupee’s decline comes after Trump threatened new tariffs on India and additional penalties over its oil imports from Russia.
The rupee closed at 87.80 against the US dollar, down 0.2 per cent from its Monday closing of 87.6550.
Says Anil Kumar Bhansali, head of treasury at Finrex Advisors, “The Indian rupee would have opened below 88 but for RBI selling dollars in the Non-Deliverable Forward market and not allowing it to depreciate further though the threat of rupee crossing 88 has not gone yet with Trump still trying to ensure that India does not buy Russian oil else he would impose extra tariffs on the country.”
Dilip Parmar, senior research analyst, HDFC Securities said, “As concerns over potential tariff hikes weighed on the Indian rupee, it closed near its record low of 87.95 against the US dollar. The currency consolidated within a narrow range after a weak start, supported by expected dollar inflows from state banks and lower imported commodity prices but closed at record low level. However, caution persists amid ongoing foreign fund outflows and trade uncertainties.”
Foreign institutional investors (FIIs) offloaded equities worth ₹2,566.51 crore on a net basis on Monday, according to exchange data.
Oil companies may have also been buyers of oil since they may now be sourcing their oil from other than Russia. “RBI for today has been protecting 87.84 for the moment but we need to see how long. The rupee should move in the range of 87.50 to 88.25 for tomorrow,” added Bhansali.
Attention now turns to the Reserve Bank of India’s monetary policy announcement. While a status quo is expected, any surprise rate cut or easing signal could boost market sentiment.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.18 per cent to 98.68.
