Rupee falls 55 paise to breach 87 level against USD as Trump tariff triggers trade war fears

The rupee plunged 55 paise to close at an all-time low of 87.17 (provisional) against the U.S. dollar on Monday (February 3, 2025), as global market sentiments were impacted after the Trump administration slapped tariffs on Canada, Mexico and China.

Forex traders said the Indian rupee touched a fresh all-time low on a surge in the U.S. Dollar index and weak global markets after Trump Tariffs on Canada Mexico, and China triggered fears of a broad trade war.

Donald Trump slapped Canada and Mexico with 25% duties and China with a 10% duty.

At the interbank foreign exchange, the rupee opened on a weak note at 87.00 and touched an intraday low of 87.29 against the American currency during the session.

The local unit finally settled at a record closing low of 87.17 (provisional), lower by 55 paise over its previous close.

On Friday, the rupee settled flat at 86.62 against the American currency.

"We expect the rupee to trade with negative bias on strong US Dollar and FII outflows amid a weak trend in the domestic markets. Worries over tariffs by the US administration may also pressurise the rupee," said Anuj Choudhary – Research Analyst at Mirae Asset Sharekhan.

However, any central bank intervention may support the rupee. Traders may take cues from ISM manufacturing PMI data from the US. Investors may remain cautious ahead of the RBI’s monetary policy meeting this week," Choudhary added.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 1.01 per cent higher at 109.46.

Brent crude, the global oil benchmark, rose 1.41% to $76.74 per barrel in futures trade.

The rupee continued to face pressure due to sustained foreign fund outflows and the broad strength of the American currency in the overseas markets due to unabated dollar demand from oil importers and weak risk appetite, traders added.

In the domestic equity market, the 30-share BSE Sensex settled 319.22 points, or 0.41%, lower at 77,186.74, while the Nifty fell 121.10 points, or 0.52 per cent, to close at 23,361.05.

Foreign institutional investors (FIIs) offloaded equities worth Rs 1,327.09 crore in the capital markets on a net basis on Saturday, according to exchange data.

Meanwhile, India's forex reserves increased $5.574 billion to $629.557 billion in the week ended January 24, the Reserve Bank said on Friday. In the previous reporting week, the overall kitty had dropped from $1.888 billion to $623.983 billion.

The reserves were on a declining trend for the last few weeks, and the drop has been attributed to revaluation, along with forex market interventions by the Reserve Bank of India (RBI) to help reduce volatilities in the rupee.

Meanwhile, Finance Secretary Tuhin Kanta Pandey on Monday said there is no concern over the rupee value, and the Reserve Bank of India is managing the volatility of the local currency.

"There is no concern about the value of the rupee. The volatility in the rupee is being managed by the RBI," Pandey told reporters.

He said the rupee is a "free float" and no control or fixed rate is applicable to the currency.