USD/INR: Rupee Trades Higher at 86.31 Against U.S. Dollar Amid Concerns Over Trade Policies

On January 27, 2025, the Indian rupee traded at 86.31 to the U.S. dollar, briefly touching an intra-day high of 86.30. The 1-month non-deliverable forward market indicated that the rupee would open near 86.30 compared to Friday’s close of 86.2050, reflecting subdued investor sentiment.

Weekly Performance and Relief Rally

Last week, the rupee posted a 0.5% gain, marking its best weekly performance in nearly 18 months. This rally relieved Asian currencies after U.S. President Donald Trump refrained from immediately imposing tariffs upon assuming office. The lack of immediate trade restrictions buoyed market confidence, especially in emerging markets.

Trade Policy Concerns Weigh on Sentiment

Despite last week’s relief, the rupee is expected to decline on Monday, driven by a dip in the offshore Chinese yuan, which fell to 7.2650 against the U.S. dollar, and persistent concerns over Trump’s trade policies.

Trump recently discussed imposing tariffs on China, the European Union, Mexico, and Canada, raising fears of global trade disruptions. On Sunday, he announced sweeping retaliatory measures, including tariffs and sanctions on Colombia, after the country denied entry to two U.S. military aircraft carrying deported migrants.

Impact of the Federal Reserve Meeting

Asian currencies, including the rupee, will also closely watch Wednesday’s upcoming Federal Reserve policy decision.

While the Fed is not expected to alter its policy rate, market participants are eager for any comments from Fed Chair Jerome Powell regarding the potential impact of Trump’s trade policies on the U.S. interest rate trajectory.

Crude Oil 

Oil prices declined as U.S. President Donald Trump implemented his first round of sanctions and tariffs, intensifying concerns about global economic and trade risks. Brent crude slipped toward $78 per barrel after recording its first weekly decline this year, while West Texas Intermediate (WTI) remained above $74 per barrel.

The U.S. imposed sanctions and tariffs on Colombia following its refusal to allow U.S. military planes carrying deported migrants to land. Additionally, the administration has threatened further trade actions against several other nations, including Canada and China, raising fears of disruptions to global trade flows.

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