The rupee opened 20 paise down on August 5 after US President Donald Trump issued a fresh threat of stiffer tariff on Indian goods for buying Russian oil. India hit back and reaffirmed its commitment to securing its economic interest amid a deepening trade war.
The currency opened at 87.85 against the US dollar after closing the previous session at 87.65 as concerns of more foreign outflows mount.
"Trump tweets against India (are) creating pressure on rupee," said Kunal Sodhani, head of treasury at Shinhan Bank.
On August 4, Trump criticised India for allegedly profiteering off Russian oil amid the war in Ukraine and threatened to “substantially” raise tariffs on Indian imports to the United States.
In a post on Truth Social, Trump accused India of buying “massive amounts of Russian oil” and then reselling it on the open market for “big profits.” “They don’t care how many people in Ukraine are being killed by the Russian War Machine,” he added.
Trump concluded the post by declaring his intention to impose higher tariffs on Indian goods entering the US, saying, “Because of this, I will be substantially raising the Tariff paid by India to the USA.”
The ministry of external affairs (MEA) posted a six-point rebuttal to Trump’s post, saying India’s decisions were driven by national interest and energy security concerns not political alignment.
It also called out “double standards” of Western powers, highlighting how the countries now criticising India had deepened their own trade ties with Russia.
"Whether these barrage of comments are mainly negotiating tactics against India to partly prod for changes in the Russia-Ukraine war remains to be seen," MUFG Bank said in a note.
“India’s Ministry of External Affairs issued a statement overnight, saying that India has been targeted by the US and EU for importing oil from Russia after the Ukraine conflict, with MEA saying the US at that time actively encouraged such imports by India to ensure global oil market stability.”
Prime Minister Narendra Modi has encouraged Indians to buy more local goods though he did not explicitly link this to tariff threats by the US, the note said.
"Today was already shaping up to be a difficult session (for the rupee), and Trump’s latest tariff threat only amplified the pressure,” a senior trader at a private bank was quoting as saying by Reuters.
"I’d fully expect the Reserve Bank of India to step in — they won’t want to let the rupee depreciate unchecked, especially in the face of US rhetoric."
He warned that overseas outflows from Indian equities may gather pace in response to rising trade tensions with the US.
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