NEW DELHI: Rupee followed
global currency market
’s trend, plunging down 67 paise against the greenback, registering a record low of 87.29 during early trade on Monday. This slip was triggered by the ongoing trade war between the US and its largest trade partners like Canada, Mexico and China.
Global markets turned volatile following US President Donald Trump’s announcement of imposing 25 per cent tariffs on imports from Canada and Mexico and 10 per cent duty on Chinese goods, which prompted investors to turn to relatively safer assets, driving up demand for the US dollar. Forex traders warn that the move could result in a major global trade war.
The rupee continued to face pressure from persistent foreign fund outflows and rising dollar demand from oil importers, amid weak risk appetite in global markets, traders added.
At the interbank foreign exchange, the rupee opened at 87.00 before slipping to 87.29 against US dollar, marking a steep fall from its previous close of 86.62 on Friday. Since the year began, Rupee had already recorded a fall of 1.5 per cent.
CR Forex advisors MD- Amit Pabari told news agency PTI, “The start of the week saw financial markets on edge as US President Donald Trump followed through on his tariff threats, imposing duties on imports from Mexico, Canada, and China.”
Meanwhile, the US dollar index, which measures the currency against a basket of six other currencies, jumped 1.30 per cent to 109.77.
“The range for the day is expected to be between 86.65/87.00 with the Reserve Bank expected to intervene to cool off the dollar bids,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
The domestic equity market also reflected investor jitters, with the BSE Sensex tumbling 575.89 points (0.74 per cent) to 76,930.07, while the Nifty declined 206.40 points (0.88 per cent) to 23,275.75. Foreign institutional investors (FIIs) offloaded equities worth Rs 1,327.09 crore on Saturday, according to exchange data.
Indian forex kitty gained $ 5.574 billion to $ 629.557 billion in the week that ended on January 24, 2025.
Since the past few weeks, India’s forex reserves have been weighed down by forex market interventions by the RBI, aimed towards reducing volatilities in the Rupee.
Market analysts belive that this could be a short term reaction to the global uncertainities, however, investors should proceed with caution in upcoming days.
