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The Indian rupee depreciated beyond the 87 mark against the U.S. dollar for the first time, as Asian currencies and equities faced a downturn following the implementation of U.S. President Donald Trump’s tariff threats.
The currency hit a record low, trading at 87.1450 per dollar, a decline of 0.6% from its value on Friday. Since early October, the rupee has weakened nearly 4%.
Anshul Chandak, head of treasury at RBL Bank, expressed concerns to Reuters about the Indian currency’s outlook, suggesting the rupee will likely remain under pressure in the upcoming weeks. The recent U.S. policy changes under President Trump and the rupee’s prior strong performance in the emerging markets segment have set the stage for potential further depreciation.
Over the weekend, Trump imposed tariffs on imports from Canada, Mexico, and China, prompting Canada to announce retaliatory measures. The new tariffs have heightened concerns about a potential trade war, which Morgan Stanley (NYSE:MS) noted could escalate, particularly affecting Asia due to its high trade dependency and several economies running significant trade surpluses with the U.S.
The broader impact of these developments was evident as Asian currencies, including the Korean won, Malaysian ringgit, Indonesian rupiah, and Thai baht, experienced declines ranging from 0.9% to 1.2%. Additionally, U.S. equity futures and Asian shares also saw a drop.
In India, foreign investors have been withdrawing funds from the equity market due to the country’s slowing growth rate. This trend may intensify with the new tariffs stirring fears about the global economic outlook.
Chandak mentioned that the Reserve Bank of India (NSE:BOI)’s (RBI) potential reduced intervention strategy might contribute to the rupee’s weakness, as the country experiences continued outflows from both debt and equity markets.
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