U.S. Tariff Ruling Raises Dollar; Rupee Slips Opening 16 Paise Lower at 85.52 Against the Dollar

The Indian rupee started Thursday on a weaker note, opening 16 paise lower at 85.52 against the U.S. dollar. That’s a dip from the previous close of 85.36. Why the drop? A strong rebound in the U.S. dollar followed a significant court decision on trade tariffs, shaking the market.

A U.S. federal court ruled that many of the tariffs imposed during Donald Trump’s presidency, under the pretext of a national emergency, were unconstitutional. The court made it clear: trade powers lie with Congress, not the president. This decision brought some clarity to U.S. trade policy, which cheered investors and gave the dollar a serious boost.

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How the Ruling Rocked Global Currencies

The court’s verdict didn’t just stay within U.S. borders; it sent shockwaves through global currency markets. The U.S. Dollar Index, which tracks the greenback against six major currencies, shot up past 100. That kind of strength typically puts pressure on emerging market currencies, such as the rupee, Indonesia’s rupiah, and South Africa’s rand.

Currency experts say the rally isn’t just about the ruling itself. It’s also about what the verdict represents: confidence in legal checks and predictability in U.S. policy. “It cleared up a major piece of uncertainty around U.S. protectionism,” said Radhika Rao, a senior economist at DBS Bank. “That made the dollar a go-to haven again, especially with political instability elsewhere.”

Rupee Likely to Stay in a Tight Band, for Now

Although the rupee slipped initially, analysts expect it to remain within a relatively narrow trading range in the near term. Traders suggest the USD/INR pair will likely bounce between 84.80 and 86.00, depending on how much foreign capital comes in and where crude oil prices go.

A dealer at a government-owned bank noted that demand for dollars is still coming in from both local and foreign banks, possibly for end-of-month payments or debt servicing. That means the rupee might struggle to recover quickly.

Despite the decline, don’t expect the Reserve Bank of India to step in aggressively. The RBI tends to manage sharp volatility but usually avoids pegging the currency to a specific level.

Stocks Hold Steady Amid Currency Dip

Interestingly, Indian stock markets weren’t rattled. The Sensex and Nifty 50 remained relatively stable on Thursday, indicating that investors remain confident in India’s economic outlook despite the global uncertainty.

Foreign investors also kept their faith. On May 27, foreign portfolio investors (FPIs) pumped $111.7 million into Indian equities and another $22 million into bonds. This demonstrates consistent interest in Indian assets, particularly with solid earnings reports and stable macroeconomic fundamentals supporting them.

“Foreign investors seem to be playing the long game,” said one analyst. “They’re betting on India’s strong corporate performance and growing consumer demand,” he added.

Crude Oil Prices Add to the Pressure

One more headwind for the rupee? Rising oil prices. Brent crude climbed 1.2% to hit $85.7 a barrel, driven by expectations of higher summer demand and ongoing geopolitical tension in the Middle East. India imports a significant amount of its oil, so any price hike widens the trade deficit and puts additional pressure on the rupee. 

What’s Next for the Rupee?

So where does the rupee go from here? The answer depends on several moving parts, both at home and abroad. Keep an eye on these:

U.S. Economic Reports: Inflation and jobs data will give hints about future Fed rate moves. Higher inflation could further strengthen the dollar.

RBI’s Policy Meeting: The central bank’s next meeting is in mid-June. While rates might stay unchanged, its comments on inflation and global risks will be crucial.

Global Events: Political uncertainty in Europe and Asia could trigger a risk-off sentiment, prompting more investors to seek the safety of the dollar.

Experts Weigh In

Market watchers are split on how much further the rupee might slide. Some see 85.50–86.00 as the near-term cap, while others warn that surprises, especially in U.S. data or commodity markets, could push it lower.

“The rupee’s drop is more about global factors than anything India-specific,” said Aditi Nayar, Chief Economist at ICRA. “India’s forex reserves are strong, and we’re not seeing panic in stocks or bonds.”

And she’s right; India’s foreign exchange reserves are solid at $643 billion. The RBI also has tools, including spot and forward market interventions, to cool things down if needed.

Bottom Line

Thursday’s dip in the rupee to 85.52 per dollar is a reminder of how much global events, like a U.S. court ruling, can sway emerging market currencies. The U.S. dollar has regained its safe-haven status for now, but the rupee’s overall story remains resilient thanks to India’s economic fundamentals.

Expect choppy waters ahead as markets react to economic data, oil prices, and policy moves. The big question: can the rupee stay below 86, or will the pressure push it even lower?