The rupee took a sharp hit on Wednesday, dropping 52 paise to close at 87.43 against the US dollar. Investors were spooked by growing uncertainty over the India-US trade deal after US President Donald Trump hinted at imposing fresh tariffs of 20-25% ahead of the August 1 deadline. Forex traders pointed to month-end dollar demand from importers and foreign fund outflows as additional pressures weighing the rupee down.
The domestic currency opened the day at 87.10 before sliding to an intra-day low of 87.05. By session close, it had settled at 87.43, marking one of its weakest showings in recent months. This comes after Tuesday’s decline, where the rupee had already touched an over four-month low, closing at 86.91 against the dollar.
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, didn’t mince words. “Indian rupee tanked sharply on uncertainty over India-US trade deal,” he said. The looming threat of higher tariffs and persistent foreign outflows have traders bracing for further depreciation in the days ahead.
Global factors aren’t helping either. Rising oil prices and key monetary policy decisions from the US Federal Reserve and the Bank of Japan later this week are keeping investors on edge. Market participants will also be watching US economic data, including Q2 2025 GDP figures, ADP non-farm employment numbers, and pending home sales, for cues on the dollar’s strength.
Despite the rupee’s struggles, domestic equity markets held their ground. The Sensex ticked up 0.18% to close at 81,481.86, while the Nifty edged higher by 0.14% to settle at 24,855.05. However, foreign institutional investors (FIIs) were net sellers, offloading equities worth Rs 4,636.60 crore on Tuesday.
Trade tensions remain the dominant theme. President Trump’s remarks added fuel to the fire when he said the deal with India was “not finalized” and criticized the country’s tariff policies. With US negotiators scheduled to visit India on August 25 for further talks, hopes for an interim agreement before the August 1 deadline appear slim.
If no deal is reached, Indian exporters could be hit with an additional 16% duty on top of existing 10% tariffs. US Trade Representative Jamieson Greer acknowledged that more negotiations are needed, leaving little room for optimism in the short term.
For now, traders are playing it safe. Analysts expect the USD/INR pair to swing between 87-87.90 in the near term as markets digest incoming data and policy signals. The rupee’s fate hinges largely on whether the two economic giants can bridge their differences before the tariff window closes.