Rupee Drops to 85.89 vs Dollar as Trump’s Tariff Threats Rattle Markets

Mumbai, July 11 – Following a surge of negative sentiment sparked by former US President Donald Trump’s declaration of high tariffs on Canadian imports, the Indian rupee fell 19 paise to 85.89 against the US dollar in early Friday trading.

The rupee dropped 19 paise from Thursday’s finish of 85.70 to an early low of 85.89 at the interbank foreign exchange, where it had opened at 85.76. The rupee had ended the day before a little stronger, up 3 paise.

Global Trade Tensions Weigh on Currency Markets

Market jitters intensified after Trump declared a 35% tariff on Canadian imports starting August 1. He also hinted at further blanket tariffs ranging from 15-20% on other US trade partners, including the European Union. These aggressive trade moves have sparked concerns over inflationary risks and potential delays in global interest rate cuts.

“Such moves raise inflationary risk0-ironically pushing rate cuts even further out of reach. And while India has so far escaped direct tariff action, the broad-based nature of Trump’s tariff crusade has markets on edge,” said Amit Pabari, MD at CR Forex Advisors.

Limited Room for Rupee Appreciation

Pabari added that support for the rupee near 85.50 remains strong, but upside resistance could push the currency pair closer to 86.00. A sustained breach beyond that may open the path toward 86.20-86.50 in the near term.

Meanwhile, the US dollar gained ground globally, with the dollar index rising 0.15% to 97.79. Brent crude futures were also up 0.28% at USD 68.83 per barrel, adding to pressure on emerging market currencies.

Domestic Market Trends

On the domestic front, Indian equity benchmarks were in the red. The BSE Sensex slipped 234.74 points or 0.28% to 82,955.54, while the NSE Nifty declined 58.55 points or 0.23% to 25,296.70.

Despite the weak market sentiment, foreign institutional investors (FIIs) remained net buyers, purchasing equities worth Rs 221.06 crore on Thursday, as per exchange data.

India-US Trade Talks Gain Momentum

Amid rising global trade uncertainty, India is advancing negotiations on a bilateral trade agreement with the United States. Rajesh Agrawal, Special Secretary in the Department of Commerce and chief negotiator, stated that the aim is to conclude the first phase of the agreement by September or October.

The outcome of these discussions is expected to play a significant role in shaping India’s trade landscape amidst an increasingly volatile global environment.

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