The rupee declined 38 paise — steepest in more than five weeks — to settle at 85.82 (provisional) against the US dollar on Monday amid the wide-spread global turbulence over escalated tariff war and fear of a global economic slowdown.
A steep decline in crude prices and a weaker American currency failed to arrest the fall in domestic currency due to the withdrawal rush by foreign as well as domestic equity investors, forex traders said.
They said the currency exchange markets globally faced extreme volatility as investors tried to escape risks, following the US administration’s sweeping reciprocal tariffs on multiple countries and China’s retaliatory move on the American imports.
On the domestic macroeconomic front, market participants were watchful as the Reserve Bank of India’s (RBI’s) monetary policy committee began its three-day deliberations on key interest rates. The decision of the six-member rate-setting panel will be announced on Wednesday.
At the interbank foreign exchange, the rupee opened at 85.79 and moved in a wide range between the high of 85.57 and the low of 85.90 against the greenback during the day. The unit ended the session at 85.82 (provisional) against the dollar, registering a loss of 38 paise from its previous closing level.
Earlier, the domestic unit had witnessed such a steep fall on February 25 when it depreciated 47 paise.
On Friday, the rupee settled 14 paise lower at 85.44 against the US dollar, a day after gaining 22 paise on Thursday, following the implementation of the US’ reciprocal tariff on about 60 countries.
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said the rupee declined on risk-off sentiments in global markets and a strong US dollar.
He said the rupee is expected to trade with a negative bias due to weak global markets and ongoing uncertainty around trade tariffs.
“Selling pressure by FIIs may also weigh on the domestic currency. However, weak crude oil prices may support the rupee at lower levels. USD-INR spot price is expected to trade in a range of `85.50 to `86.20,” Choudhary added.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.20 per cent lower at 102.56.
Analysts attributed the weakening dollar to disappointing services, PMI data, and concerns over inflation and economic growth due to the global tariff war as China imposed 34 per cent import duties in retaliation to the Donald Trump administration’s sweeping tariff move.
Brent crude, the global oil benchmark, fell sharply by 3.03 per cent to $63.59 per barrel in futures trade, hit by twin shocks of Trump’s tariffs and an OPEC+ decision to increase output faster than previously announced.
In the domestic equity market, the 30-share BSE Sensex crashed 2,226.79 points, or 2.95 per cent, to 73,137.90, while the Nifty tanked 742.85 points, or 3.24 per cent, to 22,161.60 points.
Foreign Institutional Investors (FIIs) offloaded equities worth `3,483.98 crore on a net basis on Friday, according to exchange data.
The RBI on Friday said the country’s forex kitty jumped from $6.596 billion to $665.396 billion during the week ended March 28. In the previous reporting week, the overall reserves rose $4.529 billion to $658.8 billion.
This is the fourth consecutive week of increase in the reserve, which was on a declining trend recently due to revaluation along with forex market interventions by the RBI to help reduce volatilities in the rupee.
