By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee dropped to an all-time low against the U.S. dollar on Thursday, in a slide that reflects the mounting strain of U.S. tariffs on Asia’s third largest economy.
The currency’s decline underscores that punitive U.S. tariff on India, which kicked in last month, are denting investor confidence in India and leaving the rupee among the most vulnerable among Asian peers. Foreign investors have withdrawn a net of $11.7 billion from Indian debt and equity markets so far this year.
The rupee dropped to 88.44 to the U.S. dollar, slipping past its prior all-time low of 88.36 hit last Friday.
Washington’s steep tariffs have hurt India’s growth and trade outlook and clouded the path for currency.
To curb the impact, Indian Prime Minister Narendra Modi has rolled out consumption tax cuts. Both the countries are also looking at continued negotiations to address the trade barriers.
For now, exporters face uncertainty over order flows, while importers have been forced to hedge more aggressively, distorting the demand-supply balance in the currency market.
The Reserve Bank of India has stepped in frequently to temper the pace of the rupee’s decline. Market participants say the central bank has been active in the market, selling dollars to smooth volatility and prevent large swings.
The interventions are not aimed at defending any particular level, bankers say, but are intended to keep the slide “measured” and to prevent unease among corporates and investors.
The rupee’s weakness is in contrast to its regional peers, most of which have managed to find support from expectations of a Federal Reserve rate cut next week.
Near-term weakness in the rupee is likely to persist considering the impact of the U.S. tariffs on labour-intensive sectors, Abhishek Goenka, founder & CEO of IFA Global, said.
Goenka is advising clients to take into account the business visibility to make sure they are not over-hedged.
(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)
