The rupee tumbled 61 paise, or 0.71%, to close at 85.8425 against the dollar on Monday, posting its steepest single-day decline since January 12. The drop came as global financial markets were rattled by US President Donald Trump’s sweeping tariff plans, which sent Asian currencies and equities sharply lower.
“An intensifying trade war triggered by Trump’s tariff policy weighs on the rupee. The heightened uncertainty has triggered a risk-off sentiment, leading to outflows from emerging markets,” said Kunal Sodhani, vice president – treasury, Shinhan Bank. “The dollar index sharply bounced back above 103 levels, pushing the greenback higher against the majors”.
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Any major weakening in the Chinese Yuan can have its negative impact on the rupee, he added. The dollar index, which gauges the greenback’s strength against a basket of six currencies, was up 0.2% to 103.2. Chinese yuan declined 0.3% to a near four-month low. Among major Asian currencies, Philippine peso was the worst hit, falling 1.06%, followed by Malaysian ringgit which declined 1.04%. South Korean won was down 0.19% while Japanese Yen fell 0.1%. Taiwanese Dollar bucked the trend and strengthen by 0.14%.
“We expect the rupee to trade with a negative bias as weak global markets and ongoing uncertainty around trade tariffs may pressure the local currency,” said Anuj Choudhary, research analyst, Mirae Asset Sharekhan. “Selling pressure by FIIs may also weigh on the domestic currency. However, weak crude oil prices may support the rupee at lower levels.”
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The decline in the rupee came even as oil prices extended their plunge. Brent crude, the global oil benchmark, dropped by 3% to $63.59 per barrel in futures trade, impacted by both the US tariffs and decision of the OPEC+ to accelerate output increases.
Analysts say the RBI has sufficient forex reserves to defend the rupee – reserves jumped by $6.596 billion to $665.396 billion for the week ended March 28, according to the latest data.
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