Mumbai, Feb 3 (PTI):
The Indian rupee plunged 67 paise to a historic low of 87.29 against the US dollar in early trade on Monday. The sharp decline follows US President Donald Trump’s decision to impose tariffs on Canada, Mexico, and China, triggering renewed fears of a global trade war.
Tariffs Spark Global Trade War Fears
- Trump Tariffs: The US administration levied a 25% duty on imports from Canada and Mexico, and a 10% duty on Chinese goods.
- Market Impact: These measures rattled financial markets, prompting investors to seek safe-haven assets and driving the US dollar to higher levels.
Pressure on the Rupee
- Opening Levels: At the interbank foreign exchange, the rupee started at 87.00 and slipped further to 87.29.
- Previous Close: On Friday, the rupee settled flat at 86.62.
- Forex Traders’ Take: Dealers attributed the rupee’s downfall to sustained foreign fund outflows, strong dollar demand from oil importers, and weak risk appetite in global markets.
- Expert View: Amit Pabari, MD of CR Forex Advisors, noted that the escalating trade war has led to risk aversion, fueling demand for the US dollar and pushing it toward the 109.50 mark.
US Dollar Strength and Global Market Reaction
- Dollar Index: The greenback’s strength, measured against a basket of six major currencies, climbed 1.30% to 109.77.
- Other Currencies:
- Euro fell to 1.0224
- GBP declined to 1.2261
- Yen weakened to 155.54
- Yuan slumped to 7.3551
- IDR to 16448
- KRW to 1470
- Brent Crude: Global oil benchmark rose 0.71% to USD 76.21 per barrel in futures trade.
Domestic Markets and RBI Intervention
- Stock Indices: The BSE Sensex was down 575.89 points (0.74%) at 76,930.07, while the Nifty dropped 206.40 points (0.88%) to 23,275.75.
- FII Activity: Foreign institutional investors sold equities worth Rs 1,327.09 crore on Saturday, according to exchange data.
- RBI Moves: Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, expects the rupee to trade in the 86.65–87.00 range, anticipating potential RBI intervention to curb excessive dollar bids.
India’s Forex Reserves
- Latest Figures: India’s foreign exchange reserves rose by USD 5.574 billion to USD 629.557 billion in the week ended January 24.
- Previous Week: The reserves had declined by USD 1.888 billion to USD 623.983 billion.
- Recent Trend: The overall kitty’s movement has largely been influenced by revaluation adjustments and the Reserve Bank of India’s market interventions aimed at moderating rupee volatility.
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