The Indian rupee ended 5 paise down against the US dollar on February 9, after hitting a new record low of 87.96 during early trading hours. The rupee’s fall came amid rising concerns over US President Donald Trump’s announcement of 25% tariffs on steel and aluminum imports, which led to a surge in the dollar index.
Highlights:
- Indian rupee hits a new record low of 87.96 against the US dollar during early trading.
- The local currency ended at 87.48 against the greenback, down 5 paise from the previous session’s close.
- US President Donald Trump announces 25% tariffs on steel and aluminum imports, affecting global trade.
- Rupee intervention by the Reserve Bank of India (RBI) helped stabilize the currency, pushing it back from the new low.
- Dollar index rises to 108.336, continuing its bullish momentum.
Factors Behind the Decline
On February 9, the Indian rupee opened at 87.9175 against the US dollar, significantly weaker compared to its previous closing of 87.4275. The local currency touched an all-time low of 87.9563 in early trade, prompted by the US tariff announcement. This led to increased concerns in global markets, further strengthening the dollar.
Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, stated, “Today’s intervention was a big one from the RBI, taking the rupee down from 87.9575 to 87.41 — a rare and significant move in recent times.”
Impact of US Tariff Plans
President Trump announced a 25% tariff on all imports of steel and aluminum from all countries, including India. This move is expected to disrupt global trade dynamics, potentially affecting the Indian economy. The tariffs are set to impact both the metal exports and trade balance, further straining the rupee.
Trump also hinted at additional reciprocal tariffs on countries that impose taxes on US imports, a move that could escalate tensions in international trade.
RBI’s Intervention to Support the Rupee
The Reserve Bank of India likely intervened in the market to curb the rupee’s decline. Following the early dip to 87.96, the rupee bounced back to end at 87.48, suggesting RBI’s support in stabilizing the currency. Bhansali noted, “88.00 should act as a significant support level for the rupee, while 87.30 could be a support for the dollar.”
Latest Developments on Monetary Policy
The RBI’s monetary policy committee (MPC), led by new governor Sanjay Malhotra, kept the repo rate unchanged at 6.25% after a 25 basis point cut earlier in the month. The decision was aimed at boosting economic growth, with GDP growth projections for FY26 at 6.7%. Despite the rate cut, the RBI’s neutral stance provides no immediate relief to the rupee against the US dollar.
Dollar Index Surge
The US dollar strengthened as a result of Trump’s tariff announcement, with the dollar index rising to 108.336 in early trade, up from 108.040 the previous session. This upward movement added pressure on the Indian rupee, as a stronger dollar tends to hurt emerging market currencies like the rupee.
Outlook for the Rupee
The ongoing trade tensions and US tariff plans are expected to continue influencing the rupee’s performance in the short term. As global markets react to the US-China trade war and other geopolitical factors, the rupee may face additional volatility.
The Reserve Bank of India will need to continue its interventions to prevent further depreciation, while also balancing its monetary policy to stimulate growth in a slowing economy.
