The rupee faced a sharp decline of 45 paise on Monday, edging closer to the 88 per US dollar mark. This drop was attributed to the strength of the American currency and tariff concerns, but it eventually settled at 87.50 (provisional) amid suspected RBI intervention.
The American dollar strengthened in the global market following US President Donald Trump’s announcement of imposing 25 per cent tariffs on steel and aluminum imports, as well as reciprocal tariffs on countries imposing taxes on US exports. This move has heightened worries about a global trade war, especially with China implementing retaliatory duties.
Opening at 87.94, the rupee reached an all-time intraday low of 87.95 against the US dollar during the trading session. However, it managed to recover from early losses and ended the day unchanged at 87.50 (provisional).
Meanwhile, the dollar index, which measures the greenback’s strength against a basket of six currencies, was up by 0.14 per cent at 108.18. Analysts noted that amidst weak domestic markets and a strong US dollar index, the rupee hit fresh record lows but recovered partially due to suspected RBI intervention.
Looking ahead, traders are likely to monitor inflation data from the US and India. The USDINR spot price is projected to fluctuate within a range of 87.25 to 87.80, according to experts.
On the commodities front, Brent crude, the global oil benchmark, rose by 0.98 per cent to $75.39 per barrel in futures trade.
Amidst these movements in the currency market, Reserve Bank Governor Sanjay Malhotra emphasized that the value of the rupee against the US dollar is determined by market forces. The central bank focuses on the medium to long-term valuation of the rupee.
Foreign banks engaging in dollar-buying activities and importers securing dollars due to fears of further depreciation amidst global uncertainties have contributed to the negative bias in the Indian rupee, according to forex traders.
In the equity markets, the BSE Sensex closed 548.39 points higher at 77,311.80 points, while the Nifty settled up 178.35 points at 23,381.60 points. Additionally, foreign institutional investors (FIIs) sold equities worth ₹470.39 crore in the capital markets on a net basis last Friday.
India’s forex reserves saw a rise of $1.05 billion to $630.607 billion for the week ended January 31, as reported by the RBI on Friday. This marks an increase from the previous week’s reserves of $629.557 billion.
