The rupee slid to a new low of 87.95 vs the dollar on Monday morning as most regional currencies depreciated on fears of fresh US trade tariffs. These ‘Trump tariffs’ pushed the Indian currency by at least 0.5 per cent—or 45 paise—in early forex trade. The rupee now looks to breach the 88 mark.
The Reserve Bank of India (RBI) is expected to step in to cut further decline of the local currency, even as such notions were recently discarded by RBI's new Governor Sanjay Malhotra in his monetary policy committee (MPC) address last week. State-run banks were seen selling dollars before the market opened.
US President Donald Trump on Sunday announced that he planned to introduce tariffs of 25 per cent on steel and aluminium imports into the United States. Other tariffs matching rates levied by each country were expected to follow. This statement triggered fears of an all-out trade war, which had almost died down last week when Trump delayed Mexico and Canada.
Trump’s latest statements have now put EU nations, China, Brazil, and India on alert. The Chinese yuan fell following the Trump announcement.
Malhotra, earlier, went on to say that the central bank would only look to curb excessive volatility. Daily fluctuations in any asset were normal, and the public need not pay attention to it, the governor opined.
The Indian currency has depreciated almost consistently since Trump won the US elections last November and assumed the office of the President of the United States in January.
While the rupee was anyway touted to open weaker due to Friday’s repo rate cut by the Indian central bank, the US tariffs just sped the process along.
Indian benchmark indices Sensex and Nifty fell in early morning trade as well, with trade war fear gripping the equity market. The BSE Sensex shed more than 426 points to cross 77,433, while the NSE Nifty fell by at least 134 points to hit 23,425.
According to the latest RBI data, India’s forex reserves improved by more than USD 1 billion to reach USD 630.607 billion for the week that ended on January 31.
