The Indian rupee weakened sharply in early trade on Tuesday, slipping 22 paise to 87.78 against the US dollar. The fall came despite a softer dollar index, which edged down 0.05 per cent to 98.38 after US President Donald Trump dismissed Federal Reserve Governor Lisa Cook.
Traders said the latest weakness was triggered after the United States confirmed its plan to impose a 25 per cent tariff on Indian imports from August 27. A draft notice from the US Department of Homeland Security reignited concerns about bilateral trade relations, prompting importers to step up dollar purchases.
The rupee now trades close to its lifetime low of 87.95, with market participants closely watching for signs of central bank intervention.
Analysts highlighted three major factors driving the decline in rupee. First, the tariff shock has dashed hopes of any last-minute compromise, fuelling risk aversion among investors. Second, geopolitical tensions have deepened as peace talks between Russia and Ukraine stall, raising the likelihood of more sanctions and trade restrictions. Third, foreign investor flows have turned negative, with Foreign Institutional Investors selling equities worth ₹2,466 crore on Monday, further pressuring the domestic currency.
Brent crude traded marginally lower at 68.52 dollars a barrel, providing little relief to India’s import-heavy economy.
“The rupee has breached 87.50, and the next hurdle is 87.80 — a level where the RBI has previously stepped in. With the bias still tilted towards depreciation, central bank intervention will be closely watched,” said Amit Pabari, Managing Director at CR Forex Advisors.
The weakness in the currency was mirrored in equities. The Sensex slipped 547 points to close at 81,089, while the Nifty fell 179 points to end at 24,789.
Market experts said the Reserve Bank of India’s response will be crucial in containing volatility as the rupee hovers near record lows.
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