A customer holds hundred rupees Indian currency notes near a roadside currency exchange stall in New Delhi, India, May 24, 2024. REUTERS
MUMBAI, April 3 (Reuters) – The Indian rupee on Thursday held up reasonably well to the dip in most Asian currencies and equities, triggered by U.S. President Donald Trump’s sweeping reciprocal tariffs.
The rupee was down 0.16% to the U.S. dollar at 85.6375.
On Wednesday, Trump imposed a 10% baseline tariff on all imports from April 5 and higher duties on certain countries including 34% on China and 20% on the European Union.
U.S. equity futures plunged and Treasury yields rose on worries that the tariffs will lead to higher inflation and impede growth in the United States.
The rupee “is holding up remarkably well given the magnitude of the negative surprise on the U.S. tariff front,” said a currency trader at a Mumbai-based bank.
“Most, myself included, would have expected a more significant move, especially considering the current levels.”
The rupee is not too far from its year-to-date high hit last week.
WORD OF CAUTION
Despite the stability in the rupee post the tariff announcement, analysts caution against anticipating a further uptick from here.
“We believe are at the lower side of the dollar-rupee range,” Abhishek Goenka, CEO at FX advisory firm IFA Global, said, adding that he his clients have been hedging dollar payments between the 85.50-86 level.
Kunal Kurani, associate vice president at Mecklai Financial, concurred, saying the dollar/rupee pair “has largely bottomed out” and he has been advising his clients to hedge more “and most of them are listening”.
The recommendations to increase dollar payment hedging follows the rupee’s over 2% rally last month on the back of a turnaround in foreign portfolio inflows and unwinding of bearish wagers on the currency.
However, Barclays Bank, in a note last week, said the rally in the rupee was likely to fade.
The rally “to a large extent, has been a late catch-up trade to the rest of EM, and we do not expect INR appreciation to be sustained.”
“Our forecasts look for gradual depreciation in the months ahead.”
It expects the rupee to fall to 87.50 through the third quarter of 2025 and to 88.20 in the fourth quarter.
Reporting by Nimesh Vora; Editing by Sonia Cheema
