The Indian rupee opened on a strong note on Friday, briefly breaching the 85 mark against the U.S. dollar, buoyed by a sharp drop in the dollar index and global oil prices. The moves come amid heightened concerns over the economic fallout from President Donald Trump’s latest tariff measures.
According to Bloomberg data, the rupee appreciated by 38 paise, opening at 85.06 against the U.S. dollar, compared to Thursday’s close of 85.44. In early trade, it briefly strengthened further to 84.99 — its highest level since December 2024.
The rally in the rupee followed a significant sell-off in the U.S. dollar on Thursday, with the dollar index plunging nearly 2%, marking its steepest one-day fall in more than two years. The sell-off was triggered by mounting fears that Trump’s sweeping tariff announcement would stoke inflation and drag down economic growth.
Earlier this week, President Trump announced a 10% baseline tariff on all U.S. imports, with higher duties targeted at key trade partners including India. The aggressive protectionist move has rattled global markets, sparking a flight from the dollar as investors brace for potential disruptions in trade and investment flows.
Analysts at ING Bank said the proposed tariffs leave the dollar “naked,” adding that investor confidence could take a significant hit. “The blowback on the U.S. economy from these tariffs is real and immediate. Market sentiment is shifting fast,” the bank noted.
The risk of a slowing U.S. economy has also led to increased speculation around monetary easing by the Federal Reserve. Market participants are now pricing in as many as four rate cuts in 2025, with the first expected as early as June. The U.S. 2-year Treasury yield, often sensitive to rate expectations, has dropped to its lowest level in six months.
Across Asia, currencies saw broad gains on Friday, with the South Korean won leading the pack. The upbeat sentiment in the currency markets, however, was not reflected in equities, which extended Thursday’s losses amid global economic uncertainty.
Oil prices also slumped sharply, adding further support to the rupee. Lower crude prices are a boon for India, the world’s third-largest oil importer, helping ease inflationary pressures and improving the country’s trade balance.
While the rupee’s rebound offers some short-term relief, analysts caution that volatility may persist as global markets react to the evolving U.S. trade policy. “Markets are still digesting the implications of Trump’s tariff shock. The currency may see further swings as clarity emerges on implementation and global retaliation,” said a Mumbai-based forex strategist.
As the world watches Washington’s next move, all eyes will be on how central banks — especially the U.S. Federal Reserve — respond to the renewed volatility and economic headwinds.
