Rupee second worst performing Asian currency amid global uncertainty

rupee

The rupee was the second worst performing currency among its Asian peers on April 11 due to global uncertainty triggered by the imposition of reciprocal tariffs by US President Donald Trump on April 2.

The currency remained weak despite the sharp easing in the dollar index as limited flows from the foreign investors and falling equities restricted the gains, experts said.

According to Bloomberg data, the rupee was down 0.73 percent on April 11 from its levels of April 1, making it the weakest in Asia after the Indonesian rupiah, which had fallen 1.40 percent over the same period.

However, the rupee fared better versus some other major currencies. In comparison, the South African rand was down 4.31 percent, the Brazilian real 3.45 percent, the Norwegian krone 1.60 percent, the Australian dollar 0.92 percent and the Mexican peso 0.85 percent against the US dollar, the data showed.

“The Indian rupee remained least volatile among the Asian peers but underperformed so far this month amid foreign fund outflows amid volatile risk assets. The upbeat economic data and RBI’s (Reserve Bank of India) interest rate cut fell short in attracting foreign institutions to invest in domestic equity amid global trade worries,” said Dilip Parmar, a senior research analyst at HDFC Securities.

On April 2, Trump unveiled global reciprocal tariffs at an event at the White House. He held up a chart while speaking, showing the US would charge a 34 percent  tax on imports from China, a 20 percent on imports from the European Union, 25 percent on South Korea, 26 percent on India,  24 percent on Japan and 32 percent on Taiwan.

According to the chart, India charged 52 percent tariffs on imports from the US, “including currency manipulation and trade barriers”, and America would now charge India “discounted reciprocal tariffs” of 26 per cent.

Stock markets across the globe fell sharply in the aftermath, which resulted in sharp foreign outflows from India. This had put pressure on the rupee. But the dollar index was falling sharply as well, reacting to the higher-than-expected tariffs by the US, which restricted the fall of the local currency.

Currently, the dollar index, which measures the American currency's value against six major global peers, has fallen to 99.460, the lowest since July 18, 2023, when it was trading at 99.941.

On Wednesday, Trump announced a 90-day 'pause' on his reciprocal tariffs for all the countries except China. In his announcement, Trump retained a 10 percent baseline levy on all countries except China, which saw its tariff barrier rise to 125 percent.

Trump for the last few days has been facing pressure from fellow Republicans and business executives following extensive sell offs in the stock market there. They have been urging him to halt or end the levies, given the fear of a major trade war. Investors said that the tariffs announced could trigger a global market meltdown, and raised concerns of a looming global recession.

Trump said that people are “getting a little bit afraid”. “I thought that people were jumping a little bit out of line. They were getting yippy,” he said.

Another reason for Trump’s reversal is the steep selloff in the US government bond market, a concern raised by US treasury secretary Scott Bessent and White House officials.