The persistent weakness reflects sustained dollar demand from oil companies and importers, coupled with continued foreign portfolio investor (FPI) outflows from Indian equities, triggered by heightened trade tensions after US President Donald Trump threatened increased tariffs on Indian goods.
The local currency closed 15 paise lower compared to Monday’s close of 87.65
Ahead of the market open, the rupee traded weaker near 88 per dollar in offshore non-deliverable forwards (NDF). However, intervention by the Reserve Bank of India, through dollar sales, provided some support, enabling the currency to open firmer at 87.85. Despite this, the rupee slipped to an intraday low of 87.88, narrowly missing its all-time low of 87.95 recorded in February, according to LSEG data.
Dealers said that the threat of rupee falling past the all-time low and crossing the 88 to a dollar-mark persists, given Trump’s commentary of slapping higher tariffs on India for buying Russian oil.
“US President Donald Trump’s persistent tariff threats on India, outflows from domestic equity markets, panic buying by importers and DXY unable to find a clear direction are all adding to pressure on the rupee. Oil demand has been seen as well pushing the USDINR pair weaker,” said Kunal Sodhani, head of FX and rates treasury at Shinhan Bank India.The dollar index was down 0.3% at 98.96 on Tuesday, LSEG data showed. U.S. President Donald Trump on Monday again threatened to substantially raise tariffs on Indian goods, citing the country’s continued purchases and resale of Russian oil, after announcing a surprise 25% tariff on Indian imports last week.In response, India’s foreign ministry said it would take “all necessary steps” to protect national interests and economic security, escalating a trade row between the two countries.
Traders would now be looking at RBIs rate decision due on Wednesday, where some participants expect a rate cut, but the majority expect a pause, according to an ET poll. For Wednesday, the rupee is expected to trade in the range of 87.50 to 88.25, traders said.
