Rupee plunges to lifetime lows, breaches 88 mark against dollar as Trump's tariff pressure mounts

The Indian rupee plunged to its lifetime low of 88.24 on Friday against the US dollar over the US' 50% tariff on Indian goods in place. The slide reflects growing concerns among investors about the impact of Washington’s hefty levies on the country’s trade and growth outlook.

Today's slide in INR against the greenback comes after a Thursday break when it closed 6 paise higher following falls on five consecutive sessions prior to yesterday.

The Indian rupee opened weak today, tracking losses in other Asian currencies.

Commenting on the action, Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said that the Indian rupee's fall to its record low levels of 87.98 was because the Reserve Bank of India (RBI) allowed the 87.80 level to be breached.

So far, the currency's decline was capped by expectations that the RBI would intervene, a Reuters report said, quoting traders.

A tariff-led drag on exports could add some incremental pressure to India's trade balance, Hari Shyamsunder, vice president & senior institutional portfolio manager – emerging markets equity - India, at Franklin Templeton, said.

Jefferies Global Head of Equity Strategy Chris Wood called US President Donald Trump's decision to slap 50% tariffs on Indian-made goods, including a punitive 25% penalty for buying Russian oil, as “draconian”, emerging markets guru Chris Wood of Jefferies said India's economy is set to absorb a devastating $55-60 billion direct hit from tariffs.

"This amounts to an estimated $55-60 billion direct hit to the economy with the most negatively impacted sectors the likes of textiles, shoes, jewellery and gems, all of which are employment intensive," Christopher Wood, Global Head of Equity Strategy at Jefferies, said in his weekly newsletter GREED & fear.

The brutal tariffs, he said, stem from Trump's "personal pique" over being denied a role in resolving India-Pakistan tensions following their four-day military conflict in May. India has maintained its red line against third-party intervention in Pakistan relations, despite the economic cost of depriving Trump of "one of his opportunities to win the Nobel Peace Prize."

"The draconian tariffs India now faces is the result of an unfortunate series of events, compounded by the fact that Trump has not ended the Ukraine conflict as he stated he would do," Wood noted, explaining how India's continued Russian oil purchases have again become contentious.

The timing proves particularly cruel as the two countries were reportedly close to securing a trade deal before the Pakistan conflict erupted, triggered by the killing of 26 Indian tourists in Kashmir’s Pahalgam in April.

Indian headline indices traded in a narrow range on Friday. Around 2:20 pm, Nifty was trading flat at 24,516.30 while the BSE Sensex was hovering around 80,116.26, 36 points higher.

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