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Rupee Plunges to Record Low Amid Global Trade War Fears Triggered by Trump Tariffs

The rupee plunges to 87.29 per dollar after Trump's tariffs trigger global trade war concerns, impacting forex markets.

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Rupee Plunges to Record Low Amid Global Trade War Fears Triggered by Trump Tariffs

The rupee dropped by 67 paise, hitting a historic low of 87. 29 against the US dollar in early Monday trading, following the introduction of tariffs by Donald Trump on Canada, Mexico, and China. This action has raised concerns about a potential global trade war, according to forex traders. Trump imposed a 25% tariff on imports from Canada and Mexico, as well as a 10% tariff on goods from China. This situation, regarded as an initial move toward a possible global trade dispute, has placed additional strain on worldwide financial markets.

Persistent outflows of foreign funds, a robust dollar in international markets, and ongoing demand from oil importers have exacerbated the pressure on the rupee, traders highlighted. In the interbank forex market, the rupee started at 87. 00 before further declining to 87. 29 per dollar, reflecting a significant drop of 67 paise from its last close of 86. 62 on Friday. CR Forex Advisors MD Amit Pabari stated, “The week began with financial markets uneasy as US President Donald Trump acted on his tariff warnings, enforcing duties on imports from Mexico, Canada, and China. ”

He went on to say that the escalating trade disputes have increased risk aversion, boosting demand for the US dollar, which ascended toward 109. 50 levels. The US dollar index, which gauges the currency’s strength against six key currencies, rose by 1. 30% to 109. 77. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, remarked, “The US dollar spiked due to Trump Tariffs pushing global FX to multi-year lows with the Euro declining to 1. 0224, GBP to 1. 2261, and Yen to 155. 54. The US dollar index climbed to 109. 77, while US 10-year yields were 4. 4980 percent. Among Asian currencies, Yuan fell to 7. 3551, IDR to 16448, and KRW to 1470. ”

In another development, Brent crude futures increased by 0. 71% to $76. 21 per barrel. Bhansali additionally remarked, “The expected range for the day is 86. 65/87. 00, with the Reserve Bank anticipated to step in to temper the dollar demands. ”

In domestic markets, the BSE Sensex declined by 575. 89 points (0. 74%) to 76,930. 07, while the Nifty slipped by 206. 40 points (0. 88%) to 23,275. 75. According to exchange data, foreign institutional investors (FIIs) sold equities worth ₹1,327. 09 crore in the capital markets on Saturday. Regarding forex reserves, India’s reserves increased by $5. 574 billion to $629. 557 billion for the week ending January 24, as stated by the Reserve Bank of India. Previously, the reserves had decreased by $1. 888 billion to $623. 983 billion. The recent downward trend in reserves has been attributed to revaluation and RBI interventions aimed at diminishing rupee volatility.