RBI likely steps in to control the fall
Finance Desk – The Indian rupee dropped to a five-month low on Thursday after U.S. President Donald Trump announced a 25% tariff on goods imported from India. The rupee fell to 87.74 against the U.S. dollar but later recovered slightly to 87.56 by 11:30 a.m. IST, still down by 0.2% for the day.
The rupee is now close to its all-time low of 87.95, which it had reached in February. So far this year, the rupee has lost 2% of its value, making it one of the weakest currencies in Asia.
President Trump said on Wednesday that the U.S. is still in talks with India on trade, but the new tariff and other penalties will begin from Friday. In response, the Indian government said it is reviewing the impact of these announcements and is committed to getting a fair trade deal.
Experts believe the trade talks between India and the U.S. might result in lower tariffs. A currency analyst at MUFG noted that what matters now is whether a deal is delayed or completely off the table.
According to ANZ Bank, this trade uncertainty may keep the rupee under pressure. They also expect the Reserve Bank of India (RBI) to take steps to reduce volatility in the currency market, even if it doesn’t defend a particular exchange rate too strongly.
India’s stock markets also reacted, with both the BSE Sensex and Nifty 50 falling by about 0.4%.
At the same time, dollar-rupee forward premiums which give an idea of future exchange rates dropped. This was due to lower chances of interest rate cuts in the U.S. and some trading activities by government-owned banks.
