The rupee closed at 85.8350 per U.S. dollar, down 0.7% on the day, its worst single-day fall since January 13.
India’s benchmark equity indexes, the BSE Sensex and Nifty 50, ended about 3% lower each, their steepest one-day fall since June last year.
The onshore Chinese yuan declined 0.4% to a near four-month low of 7.3181, propelling a slide of as much as 1% in Asian currencies.
The yuan’s decline and likely outflows from Indian stocks hurt the rupee, a salesperson at a large foreign bank said.
The Reserve Bank of India may tolerate a steeper slide if China lets the yuan weaken to cushion the impact of U.S. tariffs, sources told Reuters. The all-around uncertainty has pushed up the rupee’s near-tenor volatility expectations to the highest level since August 2023. China’s retaliation to U.S. tariffs and little indication that the White House will back down has hurt risk assets globally, with European shares crashing to a 16-month-low and U.S. stock futures pointing to further pain for domestic equities.
Speaking to reporters on Sunday, Trump indicated he was not concerned about losses that have wiped out trillions of dollars in value from world stock markets.
“In FX markets, the ongoing carnage in equity markets continues to favour defensive positioning,” ING Bank said in a note, referring to the recent gains seen in safe-haven currencies like the Japanese yen and Swiss franc.
On the day, the dollar index also ticked higher by about 0.3% to 102.9 while growing wagers of rate cuts by the Federal Reserve drove U.S. bond yields lower.
