Rupee at over at four-month low at 87.43 against dollar on Trump’s tariff threat

Indian rupee

The Indian rupee ended at over four-month low on July 30, after the after US President Trump hinted that India could face tariffs between 20-25 percent amid continued negotiations for a trade deal between the two countries.

The Rupee ended at 87.4250 against the US dollar compared to 86.8200 against the greenback at previous close, lower by 61 paise down on July 30. Additionally, rising Brent crude oil prices too put pressure on the domestic currency.

Responding to a question on whether the United States would impose tariffs between 20-25 percent on India, Trump said, "Yeah, I think so. They (India) are my friend and he (Prime Minister Narendra Modi) is my friend," adding that the trade deal had not been finalised.

The tariff rate mentioned by Trump is higher than what has been offered to UK, EU and Japan, but lower than what some of the Asian peers have negotiated with the US. The weakness is likely due to worries over the potential impact of the tariff rate on exports, though Reuters reported that there has likely been an intervention by the Reserve Bank of India that has helped limit losses.

In the near-term, RBI is expected to ease the volatility, Reuters quoted a forex salesperson with a large foreign bank. "...expect RBI to continue smoothening volatility while chances of firm intervention to lift the currency are low due to the uncertain environment."

India and the US have held several rounds of talks but haven’t sealed the deal. Trump’s reciprocal tariffs will kick in from August 1, when the tariff pause ends. They are looking to reach a first tranche of a Bilateral Trade Agreement (BTA) by September or October. A US team is expected in India for the next round of talks in the middle of August.

"India has charged basically more tariffs than almost any other country....over the years...you just can't do that," Trump said.