On Monday, the Indian rupee fell to its lowest level in more than 26 months as concerns about global trade rose following China's retaliatory tariffs on US goods.
Bloomberg data show that the domestic currency fell 60 paise to end at 85.84 against the US dollar, down from 85.24 on Friday. This is the worst single session for the currency since February 6, 2023. The currency depreciated by nearly the same amount on January 13 of this year.
When US President Donald Trump imposed 54% tariffs on Chinese exports to the US, Beijing responded with 34% tariffs on all US imports. Today marks the beginning of the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) meeting, which investors will be watching closely.
Risk-off sentiment brought on by the increased uncertainty, according to Jateen Trivedi, VP research analyst-commodity and currency at LKP Securities, has resulted in withdrawals from emerging markets, including India, and a depreciation of the rupee. "Until there's clarity or resolution in tariff negotiations, markets are likely to remain volatile." According to him, there will likely be more volatility in the near future as the rupee moves between 85.25 and 86.25.
The US dollar's value in relation to a basket of other currencies is measured by the dollar index, which dropped 0.14 percent to 102.88.
The rupee was under pressure on Friday as a result of ₹3,483.98 crore in withdrawals from Indian stocks by foreign institutional investors (FIIs).
Even as oil prices continued to plummet, the rupee declined. As Saudi Arabia lowered its flagship crude price by the most in over two years due to concerns about a global recession, crude oil prices continued to decline. As of 3:44 PM IST, WTI crude dropped 3.44 percent to 59.86 per barrel, while Brent crude dropped 3.16 percent to $63.51 per barrel.
A widespread sell-off across counters caused the benchmark Indian equity indices, to plummet, closing in the red for the third consecutive session.
According to Pabari, India's foreign exchange reserves rose $6.596 billion to $665.396 billion in the week ending March 28 despite the volatility of the rupee, marking the fourth consecutive weekly gain.
"This hints at a possible RBI intervention near the 85.00 mark, which the central bank appears to be defending to quietly accumulate reserves."
