Rupee breaks 3-day gaining streak on renewed tariff threat by US

Traders are waiting developments on the anticipated tariff announcement between India and the US, which could significantly influence sentiment

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The rupee snapped its three-day gaining streak to settle at 85.80 against the US dollar on Friday, down from the previous close of 85.65 per dollar, amid renewed tariff threat by US President Donald Trump coupled with foreign portfolio outflows, said dealers.

 

Dollar demand from importers and oil companies further weighed on the domestic currency.

 

The rupee has depreciated by 0.36 per cent against the greenback in the current financial year, and has witnessed 0.19 per cent depreciation in the current calendar year so far.

 

“The depreciation was not as sharp because there is still hope for negotiation,” said a dealer at a state-owned bank.

 

“The rupee was tracking dollar index and there were some FPI outflows,” he added.

 

Trump on Thursday said that he planned to impose blanket tariffs of 15 per cent or 20 per cent. He also announced 35 per cent duties on Canadian imports, effective August 1, and warned of steeper levies if Canada retaliates. 

 

The dollar index rose by 0.3 per cent to 97.77 in Asian trade. It measures the strength of the greenback against a basket of six major currencies. 

 

Traders now await developments on the anticipated tariff announcement between India and the US, which could significantly influence sentiment. A ₹25,000 crore Qualified Institutional Placement (QIP) by SBI is expected to aid the rupee in the upcoming week.

 

“Next week rupee is expected in the range of 85.50 per dollar to 86.00 per dollar with expectations of ₹25,000 crore of QIP from SBI which could bring down rupee to higher levels. We also wait for the tariff news between India and US which everybody is eagerly waiting for,” Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

 

Meanwhile, India’s foreign exchange reserves decreased by $3 billion to $699.73 billion during the week ended July 4, latest data by the Reserve Bank of India showed. The total reserves fell on the back of a fall in foreign currency assets which decreased by $3.5 billion during the reported week.

 

On the other hand, gold reserves increased by $342 million during the same period.