Indian Rupee opens at 85.73/$; Slips 22 paise amid tariff concerns

The Indian Rupee saw its worst opening in nearly a month as US President Donald Trump hit countries with reciprocal tariffs overnight, potentially distorting trade and supply chains. 

 

The domestic currency opened 22 paise weaker at 85.73 against the greenback after closing at 85.51 on Friday, according to Bloomberg data. This is the worst opening for the currency since March 10 this year. In the last two sessions, the currency has depreciated by 28 paise on concerns of raising global trade conflict. 

 

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.  

 

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. 

 

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."

 

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. 

 

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 0.75 per cent to 103.03. 

 

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.

 

India has also shown a two-way movement of Rupee, yet India was subjected to one of the harshest treatment, Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, said. "It is possible that RBI may start buying dollars to cut it's short now that the demonstrative effect seems to be over."

 

Crude oil prices dropped after as concerns about the impact of tariffs on crude demand and the economy rose among traders. Brent crude oil was down 2.13 per cent to $73.35 per barrel, while WTI crude was down 2.29 per cent at 70.07 per barrel as of 9:10 AM IST.