Rising Indo-US trade tensions, high tariffs, and significant outflows of foreign funds caused the Indian rupee to plummet to a record low of 88.19 against the US dollar on Friday.
Experts warned that the rupee may continue to face pressure in the upcoming weeks when it crosses the 88-mark for the first time. The Reserve Bank of India (RBI) has flagged trade uncertainties as a key risk, while the government is preparing support measures to cushion exporters.
Why the Rupee is Falling?
The rupee slipped 61 paise from its previous close of 87.58 and ended the day at 88.19 per dollar. During intraday trade, it touched a low of 88.33. Forex traders said steep US tariffs, negative trends in domestic equities, and foreign institutional investor (FII) selling triggered the sharp fall.
Textile, footwear, leather, and shrimp industries may be negatively impacted by the US’s recent imposition of a 50% levy on Indian exports, which goes into effect on August 27. This move has worsened India’s trade deficit concerns, adding fresh pressure on the currency.
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RBI & Government Response
The RBI, in its latest bulletin, said that persisting uncertainties related to US trade policies pose downside risks to India’s economy. However, it noted that the inflation outlook for the near-term looks better than expected.
Commerce and Industry Minister Piyush Goyal assured that the government will soon announce measures to boost exports and expand India’s global reach. He said exporters would get all possible support to handle the ongoing trade shocks.
Global Cues and Market Impact
The dollar index, which measures the greenback’s strength, rose 0.14% to 97.94. Brent crude oil slipped 0.76% to USD 68.10 per barrel, offering some relief to India’s import bill. On the equity front, Sensex dropped 270.92 points to 79,809.65, while Nifty fell 74.05 points to 24,426.85. FIIs sold shares worth Rs 3,856.51 crore on Thursday, adding to the downward pressure.
Will the Rupee Fall Further?
Analysts predict that the rupee will move between 87.90 and 88.70 in the near future, traders are keeping a careful eye on US economic data, especially consumer spending and the core PCE price index, to affect dollar movement.
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