The Indian rupee extended its decline on Tuesday on the back of escalating trade tensions with the United States, although likely central bank intervention prevented the currency from breaching record low levels.
The rupee closed at 87.8000 to the U.S. dollar, down 0.2% from Monday’s close of 87.6550. The local currency fell to a low of 87.8850 on Tuesday, just shy of an all-time low of 87.95 hit in February.
The Reserve Bank of India helped absorb some tariff-related pressure on the rupee through interventions conducted by state-run banks, a trader at a state-owned lender said.
U.S. President Donald Trump on Monday again threatened to substantially raise tariffs on Indian goods, citing the country’s continued purchases and resale of Russian oil, after announcing a surprise 25% tariff on Indian imports last week.
In response, India’s foreign ministry said it would take “all necessary steps” to protect national interests and economic security, escalating a trade row between the two countries.
“As fears of more expensive crude oil loom, the Indian rupee stands at a crossroads amid rising geopolitical tensions,” said Abhishek Goenka, chief executive of IFA Global.
Traders and analysts said that persistent foreign outflows may accelerate, putting further strain on the rupee if talks stall.
The RBI’s interest rate decision on Wednesday could also influence the currency’s trajectory.
Meanwhile, Asian currencies traded mixed as the dollar recouped some of its losses on Tuesday. The Philippine peso dropped 0.6% after inflation hit the lowest in nearly six years. The Malaysian ringgit gained more than 0.2%, while the Indonesian rupiah was little changed.
The dollar index was down 0.3% at 98.967, as of 1007 GMT.
