The Indian rupee fell by 38 paise, marking its largest decline in over five weeks, to settle at 85.82 (provisional) against the US dollar on Monday. This drop comes amid escalating global tensions related to the ongoing tariff war and growing concerns over a potential global economic slowdown.
Despite a drop in crude oil prices and a weaker US dollar, these factors were unable to stop the rupee's slide, as both foreign and domestic equity investors rushed to withdraw from the market, forex traders noted.
They explained that global currency markets experienced heightened volatility, as investors sought to minimize risks following the US administration's implementation of extensive reciprocal tariffs on several countries, coupled with China's retaliatory tariffs on US imports.
Domestically, market participants remained cautious, closely watching the Reserve Bank of India ’s ( RBI ) monetary policy committee, which began its three-day deliberations on key interest rates. The RBI's decision is set to be announced on Wednesday.
According to news agency PTI, the rupee opened at 85.79 at the interbank foreign exchange and fluctuated between 85.57 and 85.90 against the US dollar during the day. It ended the session at 85.82 (provisional), reflecting a 38 paise drop from its previous closing level.
This marks the steepest fall for the rupee since February 25, when it had depreciated by 47 paise. On Friday, the rupee had ended 14 paise lower at 85.44 against the dollar, a day after it had gained 22 paise on Thursday following the implementation of the US' reciprocal tariffs on approximately 60 countries.
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, explained that the rupee's decline was largely driven by risk-averse sentiment in global markets and a stronger US dollar. He noted that the rupee is likely to continue trading with a negative bias due to the ongoing uncertainty surrounding trade tariffs and weak global market conditions.
"Selling pressure from Foreign Institutional Investors (FIIs) may also weigh on the rupee. However, lower crude oil prices could offer some support for the rupee at lower levels. We expect the USD-INR spot price to trade between Rs 85.50 and Rs 86.20," Choudhary said.
Meanwhile, the dollar index, which measures the US dollar's strength against a basket of six major currencies, was down by 0.20% at 102.56. Analysts attributed the dollar's weakening to disappointing services PMI data, along with growing concerns over inflation and economic growth due to the global tariff war, especially after China imposed 34% import duties in retaliation to the US tariffs.
Brent crude, the global oil benchmark, dropped sharply by 3.03% to USD 63.59 per barrel in futures trade, impacted by both the US tariffs and OPEC+'s decision to accelerate output increases.
In the domestic equity markets, the 30-share BSE Sensex plummeted by 2,226.79 points, or 2.95%, to 73,137.90, while the Nifty dropped by 742.85 points, or 3.24%, to 22,161.60.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 3,483.98 crore on a net basis on Friday, according to exchange data.
The RBI also reported that the country’s foreign exchange reserves rose by USD 6.596 billion to USD 665.396 billion during the week ending March 28. This marks the fourth consecutive week of an increase in reserves, reversing a recent decline caused by revaluation and RBI interventions in the forex market to help reduce volatility in the rupee.
Despite a drop in crude oil prices and a weaker US dollar, these factors were unable to stop the rupee's slide, as both foreign and domestic equity investors rushed to withdraw from the market, forex traders noted.
They explained that global currency markets experienced heightened volatility, as investors sought to minimize risks following the US administration's implementation of extensive reciprocal tariffs on several countries, coupled with China's retaliatory tariffs on US imports.
Domestically, market participants remained cautious, closely watching the Reserve Bank of India ’s ( RBI ) monetary policy committee, which began its three-day deliberations on key interest rates. The RBI's decision is set to be announced on Wednesday.
According to news agency PTI, the rupee opened at 85.79 at the interbank foreign exchange and fluctuated between 85.57 and 85.90 against the US dollar during the day. It ended the session at 85.82 (provisional), reflecting a 38 paise drop from its previous closing level.
This marks the steepest fall for the rupee since February 25, when it had depreciated by 47 paise. On Friday, the rupee had ended 14 paise lower at 85.44 against the dollar, a day after it had gained 22 paise on Thursday following the implementation of the US' reciprocal tariffs on approximately 60 countries.
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, explained that the rupee's decline was largely driven by risk-averse sentiment in global markets and a stronger US dollar. He noted that the rupee is likely to continue trading with a negative bias due to the ongoing uncertainty surrounding trade tariffs and weak global market conditions.
"Selling pressure from Foreign Institutional Investors (FIIs) may also weigh on the rupee. However, lower crude oil prices could offer some support for the rupee at lower levels. We expect the USD-INR spot price to trade between Rs 85.50 and Rs 86.20," Choudhary said.
Meanwhile, the dollar index, which measures the US dollar's strength against a basket of six major currencies, was down by 0.20% at 102.56. Analysts attributed the dollar's weakening to disappointing services PMI data, along with growing concerns over inflation and economic growth due to the global tariff war, especially after China imposed 34% import duties in retaliation to the US tariffs.
Brent crude, the global oil benchmark, dropped sharply by 3.03% to USD 63.59 per barrel in futures trade, impacted by both the US tariffs and OPEC+'s decision to accelerate output increases.
In the domestic equity markets, the 30-share BSE Sensex plummeted by 2,226.79 points, or 2.95%, to 73,137.90, while the Nifty dropped by 742.85 points, or 3.24%, to 22,161.60.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 3,483.98 crore on a net basis on Friday, according to exchange data.
The RBI also reported that the country’s foreign exchange reserves rose by USD 6.596 billion to USD 665.396 billion during the week ending March 28. This marks the fourth consecutive week of an increase in reserves, reversing a recent decline caused by revaluation and RBI interventions in the forex market to help reduce volatility in the rupee.
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