The Indian rupee dropped by 67 paise, hitting a record low of 87.29 against the US dollar on February 3, 2025. This happened just after US President Donald Trump imposed new tariffs on Canada, Mexico, and China, causing concerns about a possible trade war. In early trading, the rupee opened at 87.00 and quickly fell to 87.29. On Friday, it had closed at 86.62 against the dollar. Trump introduced a 25% tax on imports from Canada and Mexico and a 10% tax on Chinese goods.
Forex traders have called this the first move in what could escalate into a damaging global trade war. They explained that the rupee was also under pressure because of continued foreign fund outflows, with ₹1,327.09 crore leaving the country on Saturday. Also, the strength of the US dollar in global markets, driven by high demand from oil importers and a weak risk appetite has put more strain on the rupee.
Global oil benchmark Brent crude rose by 0.71%, reaching $76.21 per barrel in futures trading. Meanwhile, the dollar index, which measures the strength of the US dollar against six other currencies, was up by 1.30%, standing at 109.77.
Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, stated that the rupee's trading range for the day was expected to be between 86.65 and 87.00, with the Reserve Bank likely to step in to control the dollar demand.
India's forex reserves saw an increase of $5.574 billion, reaching $629.557 billion for the week ending January 24, according to the Reserve Bank's report.
Despite the recent increase, India's forex reserves had overall dropped by $1.888 billion, falling to $623.983 billion. This decline in reserves has been ongoing for the past few weeks. The drop has been mainly attributed to the revaluation of assets and the Reserve Bank's interventions in the forex market, aimed at reducing the volatility in the rupee.
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