- Indian Rupee (INR) falls, adding to last week’s losses
- Trump announced trade tariffs this weekend
- US Dollar (USD) rises against its major peers
- Trump has given Canada & Mexico one month
The US Dollar to Indian Rupee (USD/INR) exchange rate is rising adding to gains last week. The pair ended 0.39% in the previous week, settling on Friday at 86.53. At the time of writing, USD/INR trades 0.52% at 86.98 and is in a range of 86.89 to 87.46.
The Indian rupee fell to a record low against the US dollar as investors worried that Trump had fired the opening shot to a full-blown trade war, fueling the risk-off trade.
On the data front, Indian factory activity grew at the fastest pace in six months in January, boosted by resilient demand and solid output. This could bring some relief for Asia’s third-largest economy, which had seen a slowdown in growth in recent quarters.
India’s manufacturing PMI rose to 57.7 last month, up from December’s 12-month low of 56.4. The index has remained above the 50 level which separates expansion from contraction since July 2021.
Delving deeper into the data, new orders rose at the steepest rate since July thanks to strong export orders, which boosted confidence in the sector.
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback against a basket of major currencies, trades 0.05% higher, priced at 108.43 on Thursday adding to last week’s gains.
The dollar rose sharply when trading kicked off on Monday but has since given back most of those gains as investors weigh up the latest trade tariff developments. Over the weekend, Trump announced 25% trade tariffs on Mexico and Canada and 10% tariffs on China. The news sent the dollar charging higher. However, developments later on Monday, which saw Trump pause tariffs on Mexico and Canada for a month, pulled the US dollar lower.
The market fears that trade tariffs could add inflationary pressure to the US, preventing the Fed from cutting rates further.
