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The Indian rupee weakens against the dollar as the risk of fresh US trade tariffs spurred losses in most regional currencies, with the Reserve Bank of India likely stepping in to support the domestic currency.
RBI Governor Sanjay Malhotra has said the market forces decide the value of rupee with respect to the US dollar and the central bank is not worried about day-to-day movement of the currency value.
The Indian rupee on Monday plummeted by 44 paise to a fresh record low of 87.94 against US dollar in the opening trade, as the risk of fresh US trade tariffs spurred losses in most regional currencies, with the Reserve Bank of India likely stepping in to support the domestic currency.
State-run banks were spotted selling dollars before the local spot market opened, most likely on behalf of the RBI, traders said.
The rupee seemed on track to open around the 88 handle but the dollar selling intervention helped the currency hold above the psychologically important level.
Trump on Sunday said he will introduce new 25% tariffs on steel and aluminium imports into the U.S., along with reciprocal tariffs on all countries this week to match the rates levied by each country.
The dollar index was higher at 108.3, while Asian currencies declined by 0.1% to 0.6%.
Meanwhile, RBI Governor Sanjay Malhotra on Saturday said the market forces decide the value of rupee with respect to the US dollar and the central bank is not worried about day-to-day movement of the currency value.
Addressing the media after the meeting of Finance Minister Nirmala Sitharaman with the Reserve Bank board, Malhotra said that the central bank focuses on the value of the rupee in the medium to long term.
“There is no change in RBI’s approach. It does not look at any price level or band. It is our endeavour to curb excessive volatility. We should not be looking at daily movement or exchange rate,” he said in reply to a query on the rupee depreciation.
On the impact of the depreciation of the rupee against the US dollar on price rise, he said 5 per cent depreciation impacts domestic inflation to the extent of 30-35 bps.
