Rupee Turns Asia’s Second-Worst Performer as Trump Tariffs Roil Global Markets

Indian Rupee Weakens Despite Softer Dollar Index

The Indian rupee became the second-worst performing currency in Asia as of April 11, 2025, trailing only the Indonesian rupiah, as global uncertainty triggered by US President Donald Trump’s reciprocal tariff announcements roiled investor sentiment. According to Bloomberg data, the rupee depreciated 0.73 percent between April 1 and April 11, reflecting sustained pressure from foreign fund outflows and falling equities, despite a softening in the US dollar.

Currency experts noted that limited inflows from foreign institutional investors (FIIs) and volatile risk assets were key contributors to the rupee’s underperformance. While the dollar index—which measures the greenback against six major peers—fell to 99.460, its lowest level since July 2023, the rupee failed to capitalize on it due to weak domestic equity sentiment and rising geopolitical concerns.

Highlights:

• Rupee depreciated 0.73% in April so far (as of April 11).

• Only Indonesian rupiah performed worse in Asia (-1.40%).

• Dollar index down to 99.460, lowest since July 18, 2023.

• Domestic weakness persisted amid lack of foreign inflows and global uncertainty.

Comparative Currency Snapshot: Rupee vs Global Peers

Despite its Asian underperformance, the rupee still outpaced several other global currencies. The South African rand, Brazilian real, and Norwegian krone recorded significantly sharper drops against the US dollar, as risk aversion drove capital outflows from emerging and commodity-linked currencies.

Performance from April 1 to April 11 (vs USD):

• South African Rand: -4.31%

• Brazilian Real: -3.45%

• Norwegian Krone: -1.60%

• Australian Dollar: -0.92%

• Mexican Peso: -0.85%

• Indian Rupee: -0.73%

• Indonesian Rupiah: -1.40% (worst in Asia)

The rupee’s relative resilience among this group stemmed from lower volatility and stable macroeconomic data, but it still underperformed due to India-specific FII outflows and muted risk appetite.

Highlights:

• Despite weakness, rupee outperformed several emerging market and commodity-linked currencies.

• South Africa and Brazil saw the steepest declines due to increased risk aversion.

Impact of Trump’s Tariff Plan: Trade Shock and Market Meltdown

On April 2, President Trump announced sweeping global reciprocal tariffs during a White House event, displaying a chart that outlined the disparity in import duties between the US and its major trading partners. According to the chart, India imposed 52% average tariffs on US imports, prompting Trump to propose a 26% reciprocal tariff on Indian goods, part of a broader punitive framework targeting the EU, South Korea, Japan, China, and Taiwan.

The tariff chart included:

• China: 34% US tariffs (increased later to 125%)

• EU: 20%

• South Korea: 25%

• India: 26%

• Japan: 24%

• Taiwan: 32%

This triggered a sharp selloff across global equity markets, with foreign outflows from Indian equities putting direct pressure on the rupee. Investors became wary of a broader trade war and a potential global recession. The RBI’s repo rate cut and strong domestic economic data failed to stem the currency’s decline as global risk-off sentiment intensified.

Highlights:

• April 2: Trump unveiled steep tariffs on India, EU, China, and others.

• India targeted with a 26% US tariff, citing “currency manipulation and trade barriers.”

• FIIs exited Indian equities, weighing on the rupee despite softer dollar index.

Tariff Pause Brings Temporary Relief, But Rupee Still Struggles

On April 9, Trump announced a 90-day suspension of tariffs on all countries except China, where he doubled down by raising levies to 125%. While this sparked relief rallies in global stock markets—including a sharp bounce in Indian equities—the rupee’s recovery was muted, suggesting deeper investor caution.

Trump’s remarks reflected pressure from US businesses and Republican lawmakers, following a rout in both the stock market and the US Treasury bond market. Concerns over a potential global recession, fueled by synchronized tariff hikes and retaliatory measures, continued to suppress optimism.

Trump’s April 9 Tariff Revision:

• All countries (except China): 90-day pause, with a 10% baseline levy retained.

• China: Tariffs raised to 125%, maintaining full pressure.

Highlights:

• April 9: Trump halts tariffs for 90 days, except on China.

• Rupee recovery remains limited despite market bounce.

• Global volatility, weak equity flows, and cautious FIIs continue to weigh on the currency.