Indian rupee also fell after spending three weeks on an upbeat streak against the US dollar and fell 0.5 per cent to close the week of July 11. As per the statistics, the rupee declined 16 paise on Friday to 85.80 to the dollar as global trade tensions rose and the greenback strengthened.
It is observed that the recent decline in the momentum of the rupee is mostly because of the increasing strength of the US dollar and the re-emerging anxiety about world trade policies. Investors are losing faith in President Donald Trump, especially in the emerging markets, with his aggressive approach towards tariffs. Recently, Trump has suggested blanket tariffs of 15-20% on most trading partners and also posited a 10% tariff on BRICS countries, a development that has caused a new level of nervousness among all investors and financial analysts.
To fuel the situation further, Trump also announced a 35% tariff on Canadian products to come into effect in August. The ramifications of this have caused another element of doubt in the already weak global trade scenario, and traders have been forced to find shelter in the US dollar.
Such policy changes have bolstered the greenback, which has driven the dollar index by 0.6 per cent this week. Friday alone was able to see the dollar rise by 0.1 per cent against the euro, 0.2 per cent against the British pound and 0.5 per cent against the Japanese yen.
In Asia, the Indian rupee performed worse than the yen, although it was one of the lowest-performing currencies this week. The Asian market overall response has, however, been relatively low in both equities, forex and the bond markets as investors keep a keen eye on the unfolding trade relations.
In the future, more announcements from the US administration would be keenly observed by traders and policymakers, which would further expose the vulnerability of the rupee or rather take some of its pressure, depending on how the rest of the world reacts to it.
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