Indian rupee took a hard blow on Monday, skidding down by 61 paise in the afternoon trade and breaking 86 against the US dollar, after the world was shocked by a dramatic statement of former US President Trump, who threatened to enact some more taxes on BRICS countries. The domestic currency also traded at 85.5837 and fell to 86.0038 against the dollar and settled at that mark. This represented a big drop in the closing rate of the previous session, which was at 85.3950.
As explained by currency analysts, the sharp decline was due to the rising geopolitical risks following a post by Trump on Truth Social where he threatened punitive tariffs. Any nation that sides with the anti-American policies of BRICS will be slapped with an ADDITIONAL 10 per cent tariff. It will be this type of policy that will never make an exception, Trump indicated. There were revelations in the post, and it shook financial markets worldwide and mostly in the world’s emerging economies, which were closely associated with the BRICS bloc (Brazil, Russia, India, China, and South Africa).
Analysts believe that the Indian rupee, which was already stretched by foreign money outflow and fears of a slow India-US trade accord, responded sharply to the tariff warning. That being said, the arrival of Trump could not have been more unfortunate for the rupee. It added a tone of uncertainty during a time that investors were still wary, said a currency strategist based in Mumbai.
What makes the rupee compound its troubles is the larger global risk-aversion scenario as a protectionist stance becomes bruited in the United States. The financial markets of currencies are also readying themselves to be volatile, as India is still trying to work with BRICS countries in achieving further economic cooperation and also having trade with the economies of the West.
It is projected that the Reserve Bank of India will observe the state of affairs carefully and could possibly act in case of its persistence. In the meantime, the market players will continue to monitor the unfolding events in Washington and how they can affect the emerging market currencies.
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