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Investing.com-- The Indian rupee weakened sharply to a record low against the dollar on Monday, as the currency and its regional peers were rattled by U.S. President Donald Trump imposing trade tariffs on several key economies.
The rupee’s USD/INR pair- which gauges the amount of rupees required to buy one dollar- jumped 0.7% to 87.127 rupees, a record high. The currency has been steadily weakening against the dollar in recent months, with intervention by the Reserve Bank of India (NSE:BOI) providing fleeting support.
The rupee was caught in broad selling after Trump imposed trade tariffs on China, Canada, and Mexico, ramping up concerns over a global trade war. The move also sparked concerns that Trump will deliver on his other tariff threats, especially a 10% duty on all exports to the U.S.
India is fairly exposed to the U.S. as an export market.
Sentiment towards Indian markets has also been undermined by steady foreign capital outflows since late-2024, especially as gross domestic product data showed some cooling in growth after a stellar run over the past three years. The country’s economy is now set to grow at a slower pace in the coming years, as its run of 8% annual growth proved to be unsustainable.
India’s union budget, released over the weekend, provided little relief to the rupee, given that the government unveiled a round of tax cuts for the working class. This raised some questions about India’s already stretched fiscal deficit.
The budget also highlighted a consistent trend in the ruling Bhartiya Janta Party to pursue electoral politics over pushing for actual economic reform- a trend that has increasingly concerned foreign investors.