Indian rupee (INR) Market Update
The Indian rupee (INR) is currently experiencing a mixed landscape as it responds to various external pressures, notably from the ongoing trade tensions spearheaded by U.S. President Donald Trump. The recent announcement of a 26% reciprocal tariff on Taiwanese goods has sent shivers through the global market, contributing to a decline in the dollar on concerns about U.S. economic growth. Analysts have noted that, at its current level, the rupee's risks are "broadly balanced," hinting at uncertainty caused by international market dynamics.
In parallel, the Indian rupee has gradually weakened against the U.S. dollar, driven by rising energy prices which could lead to increased inflation and potential interest rate hikes in India. As the third-largest oil consumer globally, India's heavy reliance on oil imports makes it particularly vulnerable to high crude prices that exacerbate domestic inflationary pressures.
The dollar's resurgence against major global currencies has prompted investors to pull back from Asian currencies, including the INR. Market experts suggest that Trump's anticipated policies—focused on lower corporate taxes and deregulation—are likely to bolster U.S. growth, further elevating the dollar’s strength. Additionally, with the looming threat of increased tariffs, particularly targeting China, Asian currencies face heightened volatility. Experts have acknowledged that even the typically stable Indian rupee will feel the ripple effects of these policies.
On the exchange rate front, the INR to USD sits at 7-day lows around 0.011790, which is 1.6% above its three-month average of 0.011607, trading within a relatively stable 4.2% range. In contrast, INR to EUR has seen a decrease, currently at 0.010431 and falling 2.1% below its three-month average of 0.01066, navigating a wider 9.0% range. The INR to GBP also reflects a slight weakening at 0.008869, which is 1.2% below its three-month average, while the INR to JPY stays relatively stable at 1.6970, just 0.9% below its average.
Overall, as the market adjusts to U.S. economic policies and global oil prices, the Indian rupee is likely to remain under strain, making it prudent for businesses and investors to closely monitor these developments in the currency markets.