Rupee extends losses on trade tensions, but RBI intervention caps fall

The rupee depreciated further against the US dollar on Tuesday, amid escalating trade tensions with the United States, but likely intervention by the Reserve Bank of India (RBI) helped prevent a breach of record low levels of the local currency against the greenback.

 

The local currency touched the intra-day low of 87.89 per dollar, narrowly missing its record low of 87.95 per dollar hit in February. However, due to likely intervention by RBI, the rupee settled at 87.80 per dollar, against the previous day’s close of 87.66 per dollar. 

 

“The Indian rupee would have opened below 88 but for RBI selling dollar in NDF and not allowing it to depreciate further, though the threat of rupee crossing 88 has not gone yet with Trump still trying to ensure that India does not buy Russian oil else he would impose extra tariffs on the country,” said Anil Kumar Bhansali, head of Treasury and Executive Director, Finrex Treasury Advisors LLP. 

 

“Foreign portfolio investors (FPIs) as usual were sellers in equity yesterday and it continued to be the same today also. Oil companies may also be buyers of oil since they may now be sourcing their oil from other places than Russia. RBI for today has been protecting 87.84 for the moment, but we need to see how long. The closure at 87.80 was the lowest for the third consecutive day while RBI sold dollars for the rainy day,” he added.

 

US President Donald Trump on Monday renewed threats to significantly raise tariffs on Indian goods, citing India’s ongoing purchase and resale of Russian oil. This comes just a week after he announced a surprise 25 per cent tariff on Indian imports. In response, India’s foreign ministry vowed to take “all necessary steps” to safeguard national interests and economic security.

 

“Concerns over potential tariff hikes weighed on the Indian rupee, which closed near its record low of 87.95 against the US dollar. The currency consolidated within a narrow range after a weak start, supported by expected dollar inflows from state banks and lower imported commodity prices, but closed at record low level. However, caution persists amid ongoing foreign fund outflows and trade uncertainties. Attention now turns to the Reserve Bank of India’s monetary policy announcement. While a status quo is expected, any surprise rate cut or easing signal could boost market sentiment,” said Dilip Parmar, senior research analyst, HDFC Securities.