MUMBAI, Jan 28: The Indian rupee saw a decline of 25 paise, closing at 86.56 (provisional) against the US dollar on Tuesday, influenced by weakened global risk sentiment due to tariff threats issued by US President Donald Trump.
Forex traders indicated that the rupee is under persistent pressure from ongoing foreign fund outflows and the strength of the US dollar in international markets, which is further exacerbated by robust dollar demand from oil importers amid a lack of risk appetite.
In the interbank foreign exchange market, the rupee opened lower at 86.53, fluctuating throughout the day with a peak of 86.50 and a trough of 86.57 against the dollar.
The currency ultimately settled at 86.56 (provisional), reflecting a 25 paise loss from its previous closing level.
On Monday, the rupee had also weakened by 9 paise to end the day at 86.31 against the US dollar.
“The drop in the Indian rupee is largely attributed to the adverse global sentiment surrounding tariffs mentioned by President Trump, which adversely affected the Chinese Yuan and consequently bolstered the US dollar,” explained Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan.
Choudhary further noted that rising US treasury yields and outflows from Foreign Institutional Investors (FIIs) added to the rupee’s woes. However, a decrease in crude oil prices provided some support to the currency.
“We anticipate the rupee will likely continue to trade with a bearish outlook due to the strength of the US dollar and ongoing foreign fund withdrawals. The strong demand from importers for US dollars and uncertainties regarding US tariffs may further pressure the rupee,” he added.
President Trump has indicated that tariffs will be imposed on countries that he claims harm America, with China, India, and Brazil identified as high-tariff nations.
“We’re going to impose tariffs on countries and entities that truly compromise our interests. They may seek to enhance their own economies at our expense,” Trump stated during a recent gathering with House Republicans in Florida, marking his first meeting since his re-election.
Nonetheless, a general decline in crude oil prices and potential central bank interventions might bolster the rupee. Investors are expected to remain cautious leading up to the Federal Open Market Committee (FOMC) meeting this week.
The Reserve Bank of India has announced plans for open market operations (OMO) which could also provide support for the rupee at lower levels.
On Monday, the Reserve Bank stated its intention to purchase government securities valued at Rs 60,000 crore in three installments and introduced various measures aimed at infusing liquidity into the banking sector.
Meanwhile, the dollar index, which measures the dollar’s value against a basket of six currencies, was up 0.52% at 107.89.
Brent crude, the global oil benchmark, increased by 0.52% to USD 77.48 per barrel in futures trading.
In the domestic stock market, the 30-share BSE Sensex rose by 535.24 points, or 0.71%, closing at 75,901.41 points, while the Nifty gained 128.10 points, or 0.56%, to finish at 22,957.25 points.
According to exchange data, Foreign Institutional Investors (FIIs) sold equities worth Rs 5,015.46 crore in the capital markets on a net basis on Monday. (PTI)
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