Rupee Falls 55 Paise to Hit 87 Mark Against Dollar Amid Tariff Concerns

The Indian rupee experienced a sharp decline on February 25, slipping 55 paise against the US dollar to once again breach the 87-mark. The depreciation came as a result of rising safe-haven flows into the US dollar following US President Donald Trump’s confirmation that planned tariffs on Mexico and Canada would be implemented as scheduled.

According to Bloomberg data, the rupee fell by 0.51 percent from its previous day's close, alongside a decline in other Asian currencies such as the Thai Baht (-0.52%) and the Indonesian Rupiah (-0.43%). The dollar index, which measures the value of the US dollar against six major global currencies, rose to 106.769 in afternoon trade, up from its previous session close of 106.596.

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Market Impact and Trading Session Highlights

The rupee opened the day slightly stronger at 86.85 per dollar, gaining 5 paise compared to the previous session’s close. However, as the trading session progressed, increased dollar demand towards month-end, coupled with the Reserve Bank of India (RBI) squaring off positions, led to a sharp decline. By 1:53 PM, the rupee was trading at 87.16 against the dollar after touching an intraday low of 87.2525.

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted that the downward movement was exacerbated by corporate demand for dollars ahead of monthly settlements, along with the strengthening US dollar index. The broader sell-off in Asian currencies further contributed to the rupee’s weakness.

Global Factors and Tariff Concerns

The dollar regained some lost ground after reaching a two-month low in the previous trading session. This rebound was driven by investors seeking safe-haven assets following Trump’s remarks about tariffs on US trade partners. While addressing a press conference alongside visiting French President Emmanuel Macron on February 24, Trump reaffirmed that a 25 percent tariff on imports from Canada and Mexico would take effect in March.

The announcement led to renewed fears of trade disruptions, prompting investors to shift their funds into the US dollar. The strengthening of the greenback added to the downward pressure on emerging market currencies, including the rupee.

Conclusion

The rupee’s fall to the 87 level underscores the broader concerns surrounding global trade tensions and the impact of month-end dollar demand. While the RBI’s intervention could provide some support, the Indian currency may remain under pressure if the US dollar continues to strengthen. Moving forward, investors will closely monitor further trade-related developments, along with RBI’s stance on currency market interventions, to gauge the rupee’s trajectory in the near term.