Rupee: The international oil benchmark Brent crude climbed 0.52% to USD 77.48 per barrel in futures trade.
The Indian rupee fell 25 paise to close at 86.56 against the US dollar on Tuesday, weighed down by weak global risk sentiment, persistent foreign fund outflows, and increased dollar demand from oil importers.
Rupee Under Pressure
At the interbank foreign exchange, the rupee opened at 86.53 and traded within a narrow range, touching a high of 86.50 and a low of 86.57 before settling at 86.56, a 25 paise decline from Monday’s close of 86.31.
Analysts attributed the pressure on the rupee to the following factors:
- US Tariff Threats: President Donald Trump’s announcement of potential tariffs on countries like India, China, and Brazil dampened global risk appetite, impacting emerging markets.
- Strong Dollar: A robust US dollar in the overseas market exerted additional pressure.
- Foreign Fund Outflows: Sustained outflows of foreign institutional investments weakened the local currency.
- Higher US Treasury Yields: A surge in yields pushed global investors toward the dollar.
Mixed Drivers and Outlook
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Despite these headwinds, a decline in crude oil prices offered some relief to the rupee. Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, commented:
“The Indian rupee declined as global risk sentiments were dampened by tariff threats from the US.
This impacted the Chinese yuan, further strengthening the US dollar. Additionally, rising US treasury yields and FII outflows pressured the rupee, although falling crude prices cushioned the downside.”
Future Expectations
Looking ahead, Choudhary anticipates continued challenges for the rupee:
- Persistent Weakness: The rupee is likely to trade with a negative bias, driven by a strong US dollar and ongoing foreign fund outflows.
- Importer Dollar Demand: High demand from oil importers may sustain pressure on the local unit.
- Tariff Uncertainty: Concerns over potential US tariffs on countries “harming America” could exacerbate volatility.
US Tariff Concerns
In his statement, President Trump named China, India, and Brazil as “high-tariff countries” and reiterated his intent to impose tariffs on nations or entities that “mean harm” to the United States. This development has added to global economic uncertainty, further influencing forex markets.
As global markets remain cautious, the rupee’s trajectory will depend on geopolitical developments, crude oil prices, and the pace of foreign fund movements.
