- Indian Rupee (INR) fell after gains last week
- Concerns mount over US tariffs at 50%
- US Dollar (USD) is falling versus major peers
- US core PCE rose to 2.9%
The US dollar-to-Indian rupee (USD/INR) exchange rate fell on Monday after gains across last week. The pair rose 0.97% in the previous week, settling on Monday at 88.17. At 21:30 UTC, USD/INR trades -0.2% at 87.99 and traded in a range of 87.89 to 88.34.
The Indian rupee hit its lowest point against the US dollar on Monday, amid mounting concerns over higher US tariffs on Indian imports and the broader economic implications for the South Asian country.
Repeat dropped below the 88.30 lifetime low reached in the previous session to a record nadir of 88.33. The Reserve Bank of India stepped in on Friday to support the rupee, allowing it to fall below the 88 level, which caught market participants by surprise.
The Rupee will be looking for some improvement in trade relations between entering the US in order to stage any form of recovery.
The RBI has a track record of intervening to curb excessive volatility, particularly during periods of heightened uncertainty. However, the RBI has repeatedly stated that it doesn’t target a specific exchange rate.
Last week, the US raised tariffs on Indian imports by 25% to a total of 50%, which is expected to hurt India’s export competitiveness, particularly in the textiles and engineering goods sectors.
The US Dollar rose against the Rupee but fell versus its major peers. The US Dollar Index, which measures the greenback against a basket of major currencies, is falling -0.08% to 97.69, after modest gains last week.
U.S. dollar was little moved on Monday owing to the Labour Day public holiday in the US.
On Friday, the USD was also muted following the PCE data, the Federal Reserve’s preferred gauge for inflation. The data showed that core PCE rose 2.9% year on year up from 2.8%. However, the data didn’t change fed rate cut expectations, with the market still pricing in at 87% probability of the Fed cutting interest rates.
This week has a busy economic calendar, but attention will mainly fall on US non-farm payroll data on Friday, which could make or break Fed rate cut bets.
