Indian Rupee Weakens Amid US Tariff Threats, Inflation Uncertainty

The Indian rupee has been trading with a weak bias amid escalating US tariffs on Indian imports and ongoing trade tensions, settling close to record lows around 87.7 per US dollar. US President Trump imposed a 25% tariff on Indian goods, doubling recent tariff rates due to India's re-exporting of Russian oil, complicating the outlook for foreign exchange inflows and increasing inflation risks. Despite India's inflation falling to historic lows near 1.5%, the rupee remains vulnerable due to the stronger US dollar driven by the Federal Reserve's cautious approach to rate cuts, which investors are closely watching alongside upcoming US inflation data. The Reserve Bank of India has intervened in the forex market to stabilize the currency, but dwindling reserves and a policy rate lagging behind US rates limit its ability to defend the rupee effectively. Market participants expect the rupee to continue facing pressure, especially if US inflation surprises to the upside, as this would delay Fed rate cuts and sustain dollar strength. Overall, the rupee’s trajectory is being shaped by the interplay of US trade policy, domestic inflation trends, and global monetary dynamics, making it a critical barometer for emerging market risks and opportunities.