Weak Indian rupee may blunt US tariff bite, say economists
Indian rupee
's recent slide may help soften the blow from higher U.S. tariffs, economists said, with
trade tensions
between New Delhi and Washington intensifying under President Donald Trump.
The rupee dropped to 87.8850 per U.S. dollar on Tuesday, nearing its all-time low of 87.95 hit in February. Bankers said the currency would probably have breached the 88 mark if not for likely intervention by the
Reserve Bank of India
via state-run banks.
Productivity Tool
Zero to Hero in Microsoft Excel: Complete Excel guide
By Metla Sudha Sekhar
View Program
Finance
Introduction to Technical Analysis & Candlestick Theory
By Dinesh Nagpal
View Program
Finance
Financial Literacy i e Lets Crack the Billionaire Code
By CA Rahul Gupta
View Program
Digital Marketing
Digital Marketing Masterclass by Neil Patel
By Neil Patel
View Program
Finance
Technical Analysis Demystified- A Complete Guide to Trading
By Kunal Patel
View Program
Productivity Tool
Excel Essentials to Expert: Your Complete Guide
By Study at home
View Program
Artificial Intelligence
AI For Business Professionals Batch 2
By Ansh Mehra
View Program
The rupee is the worst-performing major Asian currency so far this year. While peers such as the Taiwanese dollar, South Korean won, Singapore dollar and Thai baht have appreciated between 6% and 10%, the rupee has declined by 2.5% against the dollar.
by Taboola
by Taboola
Sponsored Links
Sponsored Links
Promoted Links
Promoted Links
You May Like
20 Things Women Should NEVER Wear!
TheSeniorMag.com
Undo
The steeper U.S. tariffs imposed on India last week compared to other Asian countries - along with Trump's threat of further penalties - are seen keeping the rupee under pressure.
Against a basket of Asian currencies, many of which compete with India in export markets, the rupee has declined 3.9% since April 1, according to
HDFC Bank
.
Live Events
This depreciation provides India a competitive price advantage over trading partners, potentially offsetting at least some part of the impact of higher U.S. tariffs, economists say. India currently faces U.S. tariffs that are about 5-6 percentage points higher than those levied on most other major economies, HDFC Bank said.
"In cases where U.S. consumers try to renegotiate contracts and ask for cost-sharing of tariff burdens, the
rupee
's depreciation could provide a meaningful cushion," said Sakshi Gupta, principal economist at HDFC Bank.
The bank estimates that a sustained 1% decline in the rupee could offset 2-3 basis points of the drag on
GDP growth
from higher U.S. tariffs.
"From a structural perspective, it would be helpful if India maintained a competitive real effective exchange rate," said Dhiraj Nim, forex and rates strategist at ANZ.
Nim noted that most studies show Indian exports are sensitive to real effective exchange.
India's real effective exchange rate, as per the Reserve Bank of India's July bulletin, stood at 100.36 in June, suggesting the rupee was broadly fairly valued. In contrast, the rate had touched 108.14 last November, indicating the currency was about 8% overvalued at the time.
Faced with low domestic inflation and uncertainty over the impact of U.S. tariffs, economists expect the RBI may prefer a weaker rupee over a fairly or over-valued one.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
India Today
23 minutes ago
- India Today
Donald Trump's Truth Social launches Perplexity-powered AI search to take on Google
Truth Social, the social media platform backed by US President Donald Trump, has launched a new artificial intelligence-powered search engine named Truth Search AI, as part of its latest effort to challenge the dominance of Big Tech, especially Google. The beta version of the tool went live on Wednesday, with Trump Media & Technology Group (TMTG) announcing that it has partnered with San Francisco-based Perplexity, a rising AI startup that offers an 'answer engine' rather than a traditional search platform. 'Powered by Perplexity, a software and AI company dedicated to providing direct, contextually accurate answers with transparent citations, Truth Search AI is intended to enhance the Truth Social platform and exponentially increase the amount of information available to its users,' Trump Media said in a press feature is currently available on the web version of Truth Social, with plans to expand to iOS and Android apps the launch mirrors a broader trend of social media platforms embracing AI, including Elon Musk's Grok chatbot on X and Meta's AI assistant on Instagram and WhatsApp, Truth Search AI has drawn attention for the political context surrounding its rollout. Meanwhile, The National, a UAE state-owned outlet, noted that answers generated by the tool frequently rely on conservative-leaning media such as Fox News and Epoch Times. However, tests by 404Media suggested the tool is not entirely one-sided. In response to questions about the US economy and Trump-era tariffs, the AI reportedly offered surprisingly critical responses, citing economic slowdowns and negative impacts of tariffs. Axios reported that the version of Perplexity used by Truth Social pulls from a narrower set of sources compared to Perplexity's public-facing version. A Perplexity spokesperson confirmed that Truth Social is using its Sonar API, a developer tool that allows customisation — including source Perplexity declined to disclose financial terms of the deal, the company clarified that Truth Social, like other clients, has full control over how the tool is set up. The Sonar API, launched earlier this year, includes features specifically designed to let clients filter or prioritise sources, a top user request, according to the partnership comes at a time when AI is playing a growing role in US policy and tech development. President Trump has made AI a priority in his administration, issuing an executive order earlier this year to remove barriers to American AI leadership. Meanwhile, Perplexity has also attracted criticism over its data practices. The BBC, Forbes, and Dow Jones have all accused the company of copying or republishing material without permission. Perplexity has denied the allegations, claiming they stem from a fundamental misunderstanding of how AI and the internet work.- EndsTune InMust Watch
India Today
23 minutes ago
- India Today
Trump tariffs trigger volatility on D-Street: What should investors do?
Domestic stock markets opened on a jittery note Thursday after US President Donald Trump announced an additional 25% tariff on certain Indian exports, citing India's continued imports of Russian oil. While the move was widely expected, it has added another layer of uncertainty for investors already grappling with global Sensex slipped over 250 points at the open before paring some losses. The Nifty50 was also trading lower, reflecting broad-based caution and expectations of a volatile trading REMAINS HIGHDr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that the 21-day window before the tariffs come into effect offers room for negotiation. However, the outlook remains clouded. 'There is huge uncertainty surrounding the trade policy and to what extent both nations will be willing to make compromises,' he said. 'President Trump, fresh from the successes he has extracted in deals with others,others, including the EU, is unlikely to budge significantly from his unjustified stand. Unfortunately for India, the US is bargaining from a position of strength.'He praised India's 'mature and measured' response so far but warned that the market could remain under pressure in the near term. 'Export-oriented sectors will remain weak. Domestic consumption themes like banking and financials, telecom, hotels, cement, capital goods and segments of automobiles will remain resilient,' Vijayakumar CAUGHT OFF GUARDAccording to Santosh Meena, Head of Research at Swastika Investmart, markets had already priced in this escalation to an extent. 'This move was largely anticipated by the markets, as President Trump had earlier hinted at such a development. As a result, there is no fresh negative surprise,' he noted that India has so far resisted pressure from Washington, especially in protecting its politically sensitive agriculture and dairy sectors. He characterised the tariff hike as 'part of Trump's aggressive negotiation strategy' and pointed to the upcoming US trade delegation visit on August 24 as a key moment to believes India's core economic strength lies in domestic demand, and that acts as a buffer. 'India remains a domestic consumption-driven economy, with limited direct exposure to the US, except in key sectors like IT, pharmaceuticals, and electronics,' he said, adding that these have been spared from the latest tariff list. However, textiles, gems and jewellery, and leather may come under 'sentimental pressure in the near term.'Rahul Ahluwalia, Founder-Director of Foundation for Economic Development, said, 'The main sectoral impact will be felt by labour-intensive areas which do not have tariff exemptions, like apparel, gems, jewellery and other such sectors where overall we have more than 30bn USD of exports to the US.'WHAT SHOULD INVESTORS DO? advertisementFor long-term investors, Meena advises staying invested. 'This development is part of ongoing global trade tensions and shouldn't distract from India's long-term growth potential,' he said, suggesting that short-term corrections could offer entry opportunities ahead of an expected earnings revival in the coming traders, however, may want to be more defensive. 'The short-term outlook remains uncertain due to a combination of muted Q1 earnings, stretched valuations, and global trade tensions,' Meena said. 'A selective approach is advisable.'With geopolitical tensions rising and domestic indicators turning soft, investors are bracing for a volatile ride. Export-facing sectors may struggle in the near term, but experts seem to suggest that India's underlying consumption story remains intact.(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)- Ends
The Hindu
23 minutes ago
- The Hindu
Rupee rises 5 paise against U.S. dollar in early trade
The rupee traded in a narrow range and appreciated 5 paise to 87.67 against the U.S. dollar in early trade on Thursday (August 7, 2025), after U.S. President Donald Trump slapped an additional 25 per cent duty — doubling it to 50 per cent — on Indian goods over New Delhi's continued imports of Russian oil. Forex traders said Mr. Trump's aggressive move, which kicks in 21 days, threatens to raise total duties on select Indian exports to as high as 50 per cent — making them among the most heavily taxed U.S. imports globally. At the interbank foreign exchange, the domestic unit opened at 87.69 against the U.S. dollar then touched an initial high of 87.67, higher by 5 paise over its previous close. On Wednesday (August 6), the rupee rebounded from a record low level and closed 16 paise higher at 87.72 against the U.S. dollar. Mr. Trump's tariffs on Indian exports are likely to hit sectors such as textiles, marine and leather exports hard and was slammed by India as "unfair, unjustified and unreasonable". With this action singling out New Delhi for the Russian oil imports, India will attract the highest U.S. tariff of 50 per cent along with Brazil. The United States has imposed this additional tariff or penalty for Russian imports only on India while other buyers such as China and Turkey have so far escaped such harsh measures. The 30 per cent tariff on China and 15 per cent on Turkey is lower than India's 50 per cent. "The escalation adds to concerns over the economic impact. If no breakthrough happens within the 21-day window, FY26 GDP growth may have to be revised below 6 per cent, factoring in a 40–50 basis point hit — twice the earlier estimate from tariff effects," CR Forex Advisors MD Amit Pabari said. Mr. Pabari further noted that amid these rising tensions and economic concerns, the rupee remains vulnerable and could see further downside as uncertainty continues to mount. Meanwhile, the Reserve Bank of India opted to hold the repo rate steady at 5.50 per cent and retained a neutral stance during its latest policy review. "The decision suggests policymakers are adopting a wait-and-watch approach as they weigh the uncertain trade backdrop against an already slowing global economy," Mr. Pabari said, adding that the room for manoeuvre is tightening. India's foreign exchange reserves fell by $9.3 billion to $688.9 billion as of August 1, reflecting Central Bank's active rupee defence operations amid rising external stress, he said. Meanwhile, Brent crude prices rose 0.99 per cent to $67.55 per barrel in futures trade. The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.04 per cent to 98.21. In the domestic equity market, Sensex dropped 335.71 points to 80,208.28 in early trade, while the Nifty declined 114.15 points to 24,460.05. Foreign institutional investors (FIIs) offloaded equities worth ₹4,999.10 crore on a net basis on Wednesday, according to exchange data.
