Trump’s Trade Warning Sends Shockwaves
Global markets reacted nervously this week as US President Donald Trump reignited trade tensions, issuing fresh tariff threats targeting India. His remarks, which followed last week’s surprise 25% tariff on Indian goods, have not only unsettled investors but also pushed the Indian rupee dangerously close to record lows, forcing the Reserve Bank of India (RBI) to intervene.
Rupee Stumbles Amid Escalating Trade Friction
On Tuesday, the Indian rupee weakened to 87.8000 against the US dollar, slipping 0.2% from Monday’s close of 87.6550. At one point during the day, the rupee tumbled to 87.8850, just a whisker away from its historic low of 87.95, recorded in February.
Currency dealers revealed that state-run banks—likely acting on RBI’s behalf—stepped in to limit the rupee’s decline, absorbing some of the selling pressure fueled by fears of prolonged trade tensions with the US.
Tariff Talk Sparks Investor Anxiety
Trump’s comments accused India of reselling discounted Russian oil and warned of escalating tariffs if the country continues such activities. This development comes on the heels of last week’s abrupt tariff hike, intensifying the already strained trade ties between the two nations.
India’s Ministry of External Affairs responded firmly, asserting that it will take “all necessary measures to safeguard national interest and economic security”, indicating that retaliatory or diplomatic responses may be on the table.
As a result, investor sentiment has soured, with market participants fearing that foreign capital outflows could accelerate if the trade standoff deepens, leading to additional pressure on the rupee.
RBI Decision Looms Large
All eyes are now on the RBI’s upcoming policy announcement on Wednesday, which could play a pivotal role in shaping the rupee’s near-term movement. Analysts suggest that a dovish or unexpected stance could further unsettle the currency, while a firm tone may help restore some confidence.
Abhishek Goenka, CEO of IFA Global, noted, “With crude oil prices rising and geopolitical headwinds intensifying, the rupee finds itself at a critical juncture.”
Broader Regional Impact
Elsewhere in Asia, currency movements remained mixed. The Philippine peso dropped 0.6% after inflation data hit a near six-year low. Meanwhile, the Malaysian ringgit rose 0.2%, and the Indonesian rupiah held steady. The dollar index dipped 0.3% to 98.967, showing some recovery but still reflective of investor caution.
What’s Next?
With geopolitical uncertainty and volatile trade dynamics clouding the outlook, the rupee may continue to face downward pressure. The RBI’s policy cues and any further tariff actions from Washington will be key to determining whether this is a temporary shakeup or the start of a deeper currency challenge.
(With agency inputs)
