The Indian rupee is likely to weaken further on Tuesday, mirroring losses in the Chinese yuan after U.S. President Donald Trump issued fresh tariff threats against China.
The 1-month non-deliverable forward suggests the rupee will open between 85.90 and 85.92 per U.S. dollar, compared to 85.8350 in the previous session. On Monday, the rupee fell by 0.7%—its sharpest single-day drop in three months—amid a broader risk-off sentiment fueled by concerns that Trump’s tariff threats could dampen global growth and raise inflation.
A currency trader at a Mumbai-based bank noted that while the overall risk sentiment has improved slightly, the weakening yuan remains a concern for the rupee.
According to the trader, the rupee’s short-term direction—as well as that of other Asian currencies—now hinges entirely on how the tariff situation unfolds. If China allows the yuan to weaken further in order to offset the effects of U.S. tariffs, the Reserve Bank of India may also permit a steeper decline in the rupee.
Following Trump’s statement on Monday that he would impose an additional 50% tariff on U.S. imports from China by Wednesday unless Beijing rolls back the 34% duties it implemented last week, the offshore yuan slid past 7.36 per dollar—its lowest point in two months. China’s recent tariffs were a direct response to the reciprocal duties earlier announced by Trump.
As the trade war intensifies, investors are navigating a volatile environment. Risk assets are being sold off, safe-haven assets are in demand, and emerging market currencies—including the rupee—are under pressure.
Trump’s latest rhetoric indicates that market instability is likely to persist. “It remains to be seen how China will react to Trump’s remarks. However, signs—including a piece published in the People’s Daily—suggest that China is ready to weather the storm,” MUFG Bank said in a note.
