USD/INR Extends Rally Amidst Trump's Tariff Threats and Global Trade Tensions

USD/INR Extends Rally Amidst Trump's Tariff Threats and Global Trade Tensions

On April 7, 2025, the Indian Rupee (INR) weakened by 0.7% to close at 85.8350 per U.S. dollar, marking its most significant single-day decline in nearly three months. ​

President Donald Trump imposed substantial tariffs on major trading partners, including Canada, Mexico, and China, aiming to address trade imbalances and curb the flow of certain imports. ​

These tariff announcements led to heightened fears of a global trade war, resulting in increased volatility in currency and equity markets. ​

In response to U.S. tariffs, China implemented a 34% retaliatory tariff on U.S. goods, effective April 10, 2025. ​

The offshore yuan weakened to 7.36 per U.S. dollar, its lowest in two months, influenced by the threat of additional U.S. tariffs and China's potential currency adjustments. ​

The RBI is closely observing currency movements, particularly in the yuan, and may allow the rupee to depreciate further if the yuan weakens, to maintain export competitiveness and address widening trade deficits. ​

The RBI's interventions in the foreign exchange market aim to prevent excessive volatility and stabilize the rupee amid global trade uncertainties.