Rupee Plunges 47 Paise to 85.87 Against US Dollar Amid Tariff Worries, Rising Oil Prices

Mumbai, July 7, 2025 – The Indian rupee declined sharply by 47 paise on Monday, closing at 85.87 against the US dollar, hurt by a combination of rising global crude oil prices, a firm dollar, and foreign fund outflows amid growing trade tensions between India and the United States. This marked one of the steepest single-day falls for the rupee in recent weeks.

At the interbank foreign exchange market, the rupee opened at 85.53 and traded within a range of 85.51 to 86.03 before ending at 85.87, compared to Friday’s close of 85.40.

Key Drivers Behind the Rupee’s Fall:

• Surge in global crude oil prices: Saudi Arabia’s decision to raise oil prices for Asian buyers, despite plans to increase output in August and possibly in September, triggered strong dollar demand from oil importers and corporates.
• Tariff-related concerns: Traders cited market anxiety as the US President Donald Trump’s July 9 deadline for imposing new tariffs approaches. With no progress in an India-US trade agreement, markets fear additional US duties on Indian exports. This has led to risk-off sentiment and weakened confidence in short-term rupee stability.
• Geopolitical rhetoric: Trump’s threat of a 10% tariff on BRICS-aligned nations added to the unease. The comments came as BRICS leaders convened for their summit in Brazil on July 6–7.

Global Cues and Market Movements:

• The dollar index climbed 0.24% to 97.41. This reflects broad strength in the greenback.
• Brent crude futures edged up 0.26% to $68.48 per barrel. This added pressure on oil-importing nations like India. Oil prices have remained elevated over the past week, intensifying the demand for dollars among Indian refiners.
• On the domestic front, the Sensex rose marginally by 9.61 points to 83,442.50, while the Nifty ended flat at 25,461.30. Equity market sentiment remained cautious throughout the day, tracking global developments.

Capital Flows and Forex Reserves:

FIIs sold equities worth ₹760.11 crore on Friday, contributing to rupee weakness. However, India’s foreign exchange reserves rose by $4.84 billion to $702.78 billion for the week ending June 27, offering some cushion to the currency.  According to the RBI, the reserves build-up came primarily from revaluation gains and sustained capital inflows in earlier weeks.

Outlook: With heightened geopolitical tensions, crude price volatility, and uncertainty over the India-US trade talks, market participants expect continued volatility in the rupee in the near term.

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