Indian Rupee ends 7 paise stronger; US tariffs spark dollar, oil selloff

The domestic currency strengthened 7 paise to end at 85.44 against the greenback after closing at 85.51 on Wednesday

The Indian Rupee closed stronger on Thursday, tracking a fall in the dollar index and oil prices as fears mounted that the latest tariffs by the US will have economic implications on itself. 

 

The domestic currency strengthened 8 paise to end at 85.44 against the greenback after closing at 85.51 on Wednesday, according to Bloomberg data. The gain in the currency came after it saw the worst opening since March 10 this year. 

 

Tracking the fall in the dollar index, the currency appreciated by 2.39 per cent in March, registering the best month since November 2018. Meanwhile, during the last current financial year, it witnessed a 2.42 per cent fall. 

 

 

Overnight, the Trump administration slapped a 26 per cent tariff on imports from India. This is higher than the 20 per cent levy for the European Union, the 24 per cent for Japan and the 25 per cent for South Korea. Calling India’s tariffs “very, very tough," Trump said he was imposing 26 per cent tariffs on all imports from India — half of what India imposes on US products.

 

However, analysts from Bernstein to JPMorgan believe that if these policies persist, they could drive significant inflation in the US, weakening demand and increasing recession risks. After registering a 3.2 per cent decline in March, the dollar index — a measure of the value of the US dollar relative to a basket of foreign currencies — was down 1.68 per cent to 102.02, the lowest since October 2024. 

 

While not entirely mirroring foreign tariff rates, the move has sent ripples across economies, sparking fears of retaliation and heightened uncertainty, Amit Pabari, managing director at CR Forex Advisors, noted. "Despite these challenges, India stands on a relatively strong footing. The Reserve Bank of India has ample forex reserves, offering a buffer against currency volatility."

 

In the long run, with US economic data showing signs of weakening and trade tariffs weighing on economic growth, the Dollar Index is expected to decline toward the 100 level, pushing the Dollar-Rupee pair towards 84.80-85.00, Pabari said. Given all the above factors playing out initially, investors will start flocking towards safe haven amidst rising uncertainty in the near term, causing the rupee to find strong support around 85.50-85.60, with a potential rebound towards 86.00-86.20 levels, Pabari said.  

 

Despite an initial gap-down opening, the rupee saw strong support due to dollar weakness, leading to a sharp recovery, according to Jateen Trivedi, VP research analyst at Commodity and Currency, LKP Securities. "Moving forward, the rupee is expected to trade within the 85.00-85.90 range, with global cues and FII flows guiding the trend."

 

Crude oil prices saw the biggest fall since October last year as concerns about the impact of tariffs on crude demand and the economy rose among traders. Brent crude oil was down 4.06 per cent to $71.91 per barrel, while WTI crude was down 4.32 per cent at 68.61 per barrel as of 3:47 PM IST.