Until clarity emerges on the tariff front, the bias for the rupee remains depreciative, says an expert
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FRANCIS MASCARENHAS
The rupee plunged to fresh record lows today, breaking past the all-time high of 87.97 and closing at 88.19 against the US dollar. The sharp slide came as markets grew increasingly anxious about the fallout of 50 per cent US tariffs on India’s growth trajectory and corporate earnings.
“If the new duties remain in place for a year, they could shave off 60–80 basis points from India’s GDP growth. But the immediate and sharper concern lies in the risk of a widening trade deficit. With the US as India’s largest export destination, nearly $60 billion worth of shipments are now exposed to steep tariff barriers,” said Amit Pabari, MD at CR Forex.
Volatality ahead
Adding to market unease, sources say the RBI seemed to step back from active intervention around the 87.80 mark — a level where it was earlier seen curbing volatility. Coupled with persistent foreign outflows from local equities, this opened the door for the rupee to slide sharply lower.
Until clarity emerges on the tariff front, the bias for the rupee remains depreciative, Pabari said, adding that from a technical perspective, the next resistance for the rupee is seen in the 88.80–89 zone, while on the downside, support has shifted to 87.50.
Kunal Sodhani, head of treasury, Shinhan Bank, says fund outflows from equity markets (August equity outflows are to the tune of ₹29,000 crore and July equity outflows around ₹17,000 crore), Trump’s tariff pressure on India, month-end oil demand, and Rupee-Yuan dynamics are all creating pressure on the Rupee.
“In the last four months, the Rupee has fallen by around 6 per cent against the Chinese Yuan. The yuan-rupee exchange rate is crucial for India’s trade competitiveness, as both countries compete directly in US-bound sectors such as textiles, engineering goods, and chemicals,” he said.
“For USDINR, positionally, 87.20 may now act as a base with levels open to test 88.90. RBI continues to hold decent FX reserves and may look forward to curtail any kind of excessive volatility by their interim interventions, but may not look to hold or eye any particular level,” Sodhani said.
Published on August 29, 2025
