The Indian rupee tumbled to a record low against the US dollar on February 3, breaching the 87-mark in early trade as global financial markets reeled from US President Donald Trump’s new tariff measures.
The domestic unit weakened to 87.1100 per unit of the dollar, down from its closing price of 86.6162, in a dash for safe haven assets. The sharp fall was triggered by a rise in the US dollar index, which increased to 109.825 from 108.370 in the last session, representing widespread strengthening in the greenback in terms of key worldwide currencies.
Market experts attributed the sharp depreciation in the rupee to heightened risk aversion in consideration of Trump’s decision to introduce new tariffs. On January 31, America’s President signed an executive order, imposing a 25 percent tariff for goods entering America from Mexico and Canada and a 10 percent tariff for goods entering America from China effective February 1. In a response to queries about whether these nations could negotiate a deferment, Trump outright stated, “No, no. Not at present, no.”
Further, Trump clarified that oil imports from Canada would face a 10 percent tariff initially, but warned that broader tariffs on oil and natural gas would be introduced in mid-February. This move is expected to have ripple effects on global trade and energy markets, further adding to volatility.
“Indian rupee slips to an all-time low in a post-Trum tariff impact, with a bout of risk aversion in worldwide markets, with even safe assets including gold and cryptocurrencies under pressure. Even safe assets including gold and cryptocurrencies are under pressure. The dollar continues to dominate safe assets, with even Japanese yen and Swiss franc weakened. Rupee will go even lower towards 87.20,” says Anil Kumar Bhansali, Treasury Head and Director at Finrex Treasury Advisory LLP
Apart from external factors, outflows of capital from Indian stocks have also weighed down the rupee, with investors in emerging economies taking out funds in anticipation of heightened uncertainty. With increased worldwide trading tension and a future tightening in store for the US Federal Reserve, observers say, in the near future, India’s currency will continue to face strain.
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Source: Moneycontrol
News Desk
