INR: Indian rupee sticks to losing run on mounting tariff worries
- By Reuters -
- Feb 10, 2025
The Indian rupee (INR) weakened to its all-time low on Monday in the wake of U.S. President Donald Trump announcing fresh tariff plans, which drove regional currencies lower, while persistent portfolio outflows remained a sore point for the local unit.
The Indian rupee weakened to 87.95 against the U.S. dollar before closing at 87.4750, down slightly on the day.
The currency managed to pare most of its losses due to strong central bank intervention, exporters’ dollar selling and profit-booking by speculators holding long USD/INR positions, traders said.
Asian currencies were mostly weaker, with the offshore Chinese yuan down 0.2% at 7.31. The dollar index was down slightly at 108.2.
Trump said he will announce new 25% tariffs on all steel and aluminium imports into the U.S. later on Monday, as well as reciprocal tariffs on Tuesday or Wednesday that will be applied to all countries and match the tariff rates levied by each nation.
“While the details are still unknown, we note that India looks more vulnerable in this regard,” MUFG Bank said in a note, referring to the reciprocal tariffs.
“We think the good relationship between Trump and (Indian Prime Minister Narendra) Modi historically should imply negotiation being more likely than not,” the note added.
Modi is preparing additional tariff cuts ahead of a meeting with Trump this week, government officials told Reuters.
U.S. tariffs on India could be an additional headwind for the rupee, which has declined more than 2% so far this year.
India’s sluggish growth, foreign portfolio outflows, the uncertainty over U.S. tariffs, and increased hedging in the onshore and the non-deliverable forward market have all weighed on the Indian rupee in recent months.
Foreign investors have net sold nearly $10 billion of local stocks over the year so far. The benchmark BSE Sensex (.BSESN) and Nifty 50 (.NSEI) equity indexes ended lower by about 0.7% each on the day.