Rupee dips to record low of 87.29 against dollar as Trump tariffs fuel trade war fears
The rupee plummeted by 67 paise to a record low of 87.29 against the US dollar on Monday, February 3, 2025. This drop occurred after US President Donald Trump imposed tariffs on Canada, Mexico, and China, heightening fears of a global trade war. The rupee opened at 87.00 against the dollar, and quickly slipped to 87.29 in early trading. In contrast, it had settled flat at 86.62 on Friday.
Trump’s new tariffs include 25% duties on Canada and Mexico and a 10% duty on China. This action sparked concerns among forex traders, who saw it as the first step in a potentially destructive trade war.
The rupee’s decline was also driven by ongoing foreign fund outflows, totaling ₹1,327.09 crore on Saturday alone. Additionally, a stronger US dollar added pressure. Dollar demand from oil importers and a weak global risk appetite supported the greenback’s strength. The global oil benchmark, Brent crude, rose by 0.71% to $76.21 per barrel in futures trading. Meanwhile, the dollar index, which tracks the currency’s strength against a basket of six others, surged 1.30%, reaching 109.77.
Forex experts predict the rupee’s range for the day will be between 86.65 and 87.00. They expect the Reserve Bank of India to intervene to stabilize the rupee and curb excessive dollar demand. Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors, noted that the RBI would likely step in to manage the situation.
India’s forex reserves grew by $5.574 billion to $629.557 billion in the week ending January 24, 2025. However, overall reserves declined by $1.888 billion, continuing a downward trend. This drop is mainly due to revaluation and the RBI’s interventions in the forex market to manage rupee volatility.
