The Indian rupee weakened by 26 paise to 86.60 against the US dollar in early trade on Wednesday, as global risk appetite took a hit following renewed concerns over trade tariffs under U.S. President Donald Trump. The broader risk-off sentiment, coupled with a decline in Asian currencies, contributed to the rupee’s depreciation.
The dollar index, which tracks the greenback’s performance against a basket of six major currencies, edged lower by 0.06% to 107.85. Despite the slight decline in the index, the U.S. dollar remained firm against most Asian currencies.
The offshore Chinese yuan weakened by 0.3% to 7.27, as regional peers struggled amid trade concerns. Many Asian markets remained shut for local holidays, limiting currency movement in some economies.
Trump’s latest trade policy statements triggered a sharp reaction in currency markets. On Monday, the U.S. President announced plans to impose tariffs on imported computer chips, pharmaceuticals, and steel to shift production of essential goods back to the U.S.
Adding to investor concerns, reports from The Financial Times revealed that Scott Bessent, Trump’s nominee for U.S. Treasury Secretary, has been advocating for a universal tariff system on imports. The proposed tariff structure would start at 2.5% and increase incrementally by the same amount each month.
Meanwhile, dollar-rupee forward premiums slumped after the Reserve Bank of India (RBI) introduced measures to inject liquidity into the banking system. The one-year dollar-rupee implied yield hit a more than one-month low of 2.12% in early trading before partially recovering. Market analysts suggest that liquidity measures by the RBI, coupled with global trade concerns, will likely keep the rupee under pressure in the near term.
Oil prices stabilised after recording their largest gain in nearly two weeks, as traders assessed the potential impact of U.S. President Donald Trump’s proposed tariffs on crude imports from Canada and other major suppliers.
West Texas Intermediate (WTI) hovered near $74 per barrel after a nearly 1% rise on Tuesday, while Brent crude remained above $77. White House press secretary Karoline Leavitt reaffirmed that the tariffs on imports from Canada, Mexico, and China would take effect as early as February 1.
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Published on: Jan 29, 2025, 9:32 AM IST
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