The Indian rupee plunged to a fresh record low on February 10, sliding to 87.9563 against the US dollar, after US President Donald Trump announced a 25% tariff on all steel and aluminum imports. The sudden move sent shockwaves through global markets, fueling concerns over trade tensions and currency fluctuations.
Opening Bell Signals Trouble for the Rupee
The trading session began with the rupee opening at 87.9175 per US dollar, significantly weaker than the previous close of 87.4275. This sharp decline set the tone for a volatile trading day, with investors scrambling to assess the implications of Trump’s latest trade policy.
For months, the rupee had been under pressure due to global economic uncertainties. However, the latest slump marked a decisive downturn, raising fears of prolonged weakness in the currency. Traders and analysts pointed to heightened dollar demand and foreign capital outflows as key reasons behind the rupee’s depreciation.
Trump’s Tariffs Stoke Global Economic Fears
Trump’s announcement came during a press interaction aboard Air Force One on February 9. He declared that the US would impose a blanket 25% duty on all steel and aluminum imports, regardless of their origin. This broad policy approach, lacking specifics on the timeline, left markets guessing and further rattled investor confidence.
Historically, trade wars have often led to currency devaluations in emerging markets. With the rupee already fragile, the tariff news exacerbated its decline.
- Emerging market currencies, including the rupee, tend to react negatively to trade-related uncertainties.
- The announcement increased the likelihood of foreign capital outflows from Indian markets, putting additional pressure on the rupee.
- India’s dependence on imported raw materials means higher costs, potentially widening the current account deficit.
Market Reaction and Investor Sentiment
Equity markets reflected the unease, with the Sensex and Nifty opening lower in response to the rupee’s decline. Foreign investors, wary of increased trade tensions, pulled money from Indian equities, adding to the selling pressure. The bond market also saw a rise in yields as traders braced for further volatility.
Despite these concerns, some experts suggested that the Reserve Bank of India (RBI) could step in to stabilize the currency. While the central bank has historically refrained from aggressive intervention, a prolonged slide might force its hand. “If the rupee continues to depreciate at this pace, RBI might have to step in with measured interventions,” said a Mumbai-based forex analyst.
Comparing Rupee’s Performance with Other Currencies
While the rupee was one of the hardest-hit emerging market currencies, it wasn’t alone. Other Asian currencies also felt the heat as trade tensions escalated. Here’s a look at how some key currencies performed against the US dollar:
| Currency | Previous Close | Current Rate | Change (%) |
|---|---|---|---|
| Indian Rupee | 87.4275 | 87.9563 | -0.60% |
| Chinese Yuan | 7.12 | 7.18 | -0.84% |
| Indonesian Rupiah | 15,200 | 15,350 | -0.98% |
| South Korean Won | 1,285 | 1,295 | -0.78% |
These figures highlight that while India’s currency faced significant pressure, broader emerging market currencies were also impacted.
What’s Next for the Rupee?
The next few trading sessions will be crucial in determining whether the rupee stabilizes or continues its downward trajectory. Key factors to watch include:
- RBI’s response: Any signal of intervention could help curb the rupee’s losses.
- US policy details: If Trump’s administration provides clarity on the tariff implementation, markets may adjust accordingly.
- Foreign investor movement: Continued capital outflows could add pressure on the rupee, while inflows might provide relief.
For now, uncertainty looms large, and traders are bracing for more turbulence in the forex markets. With global trade policies in flux, currency volatility remains a key risk factor for emerging economies like India.
