Rupee Falls 28 Paise Against US Dollar Amid Tariff Uncertainty and Equity Market Slump

Mumbai, Feb 28 – The Indian rupee weakened by 28 paise to settle at 87.46 per US dollar on Friday, as strength in the American currency and a sharp decline in domestic equities weighed on investor sentiment.

Forex traders attributed the rupee's decline to mounting concerns over US tariff policies, which have introduced volatility into global financial markets and fueled uncertainty in the US Dollar Index.

At the interbank foreign exchange market, the rupee opened at 87.32 against the greenback and touched an intra-day low of 87.53 before closing at 87.46, marking a 28-paise loss from the previous day's close of 87.18.

Factors Behind the Rupee’s Decline​

• Strong US Dollar: The dollar index, which tracks the greenback against six major currencies, inched up 0.08% to 107.33.
• Foreign Institutional Investors (FIIs) Outflows: Sustained selling by FIIs, who offloaded equities worth ₹556.56 crore on Thursday, added pressure on the rupee.
• Month-End Dollar Demand: Importers' month-end demand for the dollar contributed to the domestic unit's weakness.
• US Tariff Uncertainty: Market fears were exacerbated by reports that President Donald Trump plans to impose tariffs on Canada and Mexico starting Tuesday, while also doubling the 10% tariff on Chinese imports. This development has raised concerns over global economic stability and inflationary pressures.

Equity Market Bloodbath​

Indian stock markets witnessed a sharp sell-off, with the BSE Sensex plunging 1,414.33 points (1.90%) to close at 73,198.10, while the Nifty 50 tumbled 420.35 points (1.86%) to 22,124.70. The widespread downturn in equities further dampened investor confidence.

RBI Conducts $10 Billion Dollar-Rupee Swap​

Amid tightening liquidity conditions, the Reserve Bank of India (RBI) conducted a $10 billion US dollar-rupee swap on Friday to inject long-term liquidity into the financial system. The auction saw robust demand, and settlement is scheduled for March 4 and March 6.

Under this swap arrangement, banks sell US dollars to the RBI and simultaneously agree to repurchase the same amount at the end of the swap period, helping to manage liquidity without impacting forex reserves significantly.

Global Market Movements​

• Brent Crude Prices: The international crude benchmark fell 0.74% to $73.49 per barrel in futures trade.
• US Trade Policy Impact: The looming trade tariffs have fueled concerns over global economic disruptions, leading to heightened market volatility.

Outlook​

With persistent global uncertainty and strong demand for the US dollar, the rupee may continue to face pressure in the near term. Market participants will closely monitor global trade developments, FII flows, and RBI’s policy measuresto gauge the rupee’s trajectory in the coming weeks.