Mumbai, March 4: The Indian rupee depreciated by 8 paise to 87.40 against the US dollar in early trade on Tuesday, weighed down by persistent foreign fund outflows and a prevailing liquidity deficit in the market.
Market Uncertainty and Tariff Chaos Impact Forex
Forex traders attributed the rupee's decline to ongoing uncertainty surrounding the imposition of tariffs by the United States, which has left global financial markets volatile. The instability has also influenced the US Dollar Index, adding to the rupee’s pressure.At the interbank foreign exchange, the rupee opened at 87.38, before slipping to 87.40 against the greenback, marking an 8 paise decline from its previous close of 87.32 on Monday. Notably, the rupee had gained 5 paise in the previous session.
Meanwhile, the US Dollar Index, which measures the strength of the dollar against a basket of six major currencies, stood at 106.61, reflecting a 0.12% decline amid escalating trade tensions triggered by President Donald Trump's renewed tariff policies.
Global and Domestic Market Performance
In the commodities market, Brent crude prices declined 0.63% to USD 71.17 per barrel in futures trade, easing concerns over energy cost pressures.On the domestic front, Indian equity indices were in the red, reflecting weak investor sentiment. The BSE Sensex fell 175.61 points or 0.24% to 72,910.33, while the NSE Nifty was down 61.55 points or 0.28% at 22,057.75 in morning trade.
Foreign Institutional Investors (FIIs) continued their selling spree, offloading Rs 4,788.29 crore worth of equities in the capital market on Monday, according to exchange data.
Experts Weigh In on Rupee Depreciation
"With Nifty falling consistently as Foreign Portfolio Investors (FPIs) remain net sellers, the rupee is also facing selling pressure against the US dollar, driven by heightened risk aversion," said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.Trump's Tariff Policies Heighten Global Trade Fears
On the global front, US President Donald Trump announced on Monday that a 25% tariff on imports from Mexico and Canada would take effect starting Tuesday.Trump justified the tariffs as a measure to combat fentanyl trafficking and illegal immigration, while also aiming to reduce trade imbalances and incentivize factory relocations to the United States.
"Markets reacted negatively to these developments, with concerns mounting over global trade stability," noted Amit Pabari, Managing Director at CR Forex Advisors.
Outlook
The combination of foreign fund outflows, tariff uncertainties, and risk aversion in global markets is expected to keep the rupee under pressure. Investors will be closely monitoring further developments in US trade policy and domestic market trends for cues on the rupee’s trajectory.
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