Indian Rupee Faces Threat of Lifetime Low Amid Renewed US Tariff Pressure
By Nimesh Vora | August 5, 2025
Mumbai — The Indian rupee is poised to hit an unprecedented low against the U.S. dollar following renewed threats by former U.S. President Donald Trump to escalate tariffs on Indian imports. This development has intensified concerns over fragile market sentiment and the possibility of increased foreign capital outflows from India.
Rupee Nearing Record Lows
According to market data, the one-month non-deliverable forward (NDF) of the rupee suggested that it would open in the range of 88.00 to 88.04 per dollar on Tuesday, widening from Monday’s close of 87.6550. This marks a potential breach of the rupee’s all-time low of 87.95 recorded earlier this year in February.
Despite broader weakness in the U.S. dollar on Monday, the rupee continued to experience depreciation pressure, undermining attempts at a recovery that had brought the currency near 87.20 intraday.
Trump’s New Tariff Threats Spark Market Worries
Trump’s latest statements indicated plans to significantly increase tariffs on Indian goods, citing India’s ongoing purchase and resale of Russian oil as justification for the move. His administration had already imposed tariffs set at 25% on Indian imports last week, which were perceived as steeper than anticipated.
The Indian Ministry of Foreign Affairs responded firmly, emphasizing that it would take all necessary measures to safeguard national interests and economic security amid escalating trade tensions.
A note from MUFG Bank suggested that these aggressive tariff threats might partly function as negotiation tactics aimed at influencing India’s stance in the ongoing Russia-Ukraine conflict, though the full impact remains uncertain.
Market Reactions and RBI Preparedness
A senior trader from a private Indian bank commented that the rupee was already under pressure heading into Tuesday’s session, and Trump’s renewed tariff rhetoric served to amplify the bearish sentiment. The trader expressed expectations that the Reserve Bank of India (RBI) would intervene to prevent unchecked depreciation of the currency, especially given the geopolitical uncertainties stirred by U.S. policy statements.
Moreover, escalating trade tensions are raising alarm about potential capital flight, particularly from equities markets, as foreign investors grow wary of the deteriorating bilateral trade outlook.
Key Market Indicators
- One-month non-deliverable forward for the rupee stood at 88.14.
- Onshore one-month forward premium was noted at 12 paise.
- The U.S. dollar index was up at 98.82.
- Brent crude futures slipped by 0.1%, settling near $68.70 per barrel.
- The yield on the 10-year U.S. Treasury note hovered around 4.2%.
- Data from the National Securities Depository Limited (NSDL) showed foreign investors sold a net $165.5 million worth of Indian shares on August 1, while purchasing a net $223.7 million of Indian bonds on the same day.
Outlook Amidst Fragile Sentiment
The rupee’s vulnerability comes at a time when India’s trade negotiations with the U.S. face multiple unresolved hurdles. Analysts caution that unless diplomatic tensions ease, pressure on the rupee may persist, complicating the Reserve Bank’s efforts to maintain currency stability.
Investors and market watchers will be closely monitoring evolving geopolitical dynamics, trade policy developments, and RBI interventions in the coming days to gauge the rupee’s trajectory.
For ongoing updates on the Indian economy and currency markets, stay tuned to Smart Money Mindset.
Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala
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