The Indian rupee opened on a stronger note on Friday, briefly falling below the 85 mark against the US dollar as the greenback weakened significantly and global oil prices dropped sharply. The decline in the dollar index comes amid heightened concerns over the economic impact of US tariffs, contributing to a shift in investor sentiment.
According to Bloomberg data, the rupee strengthened by 38 paise at the opening, trading at 85.06 (Dh23.1771) against the US dollar, compared to its previous close of 85.44 (Dh23.2806) on Thursday. During early trading, the currency briefly surged past the 85 mark, reaching 84.99 (Dh23.1580), its highest level since December 2024.
The dollar index, which measures the greenback’s performance against a basket of major currencies, suffered a sharp decline of nearly 2 percent on Thursday. This marked its worst single-day performance in over two years. The plunge follows US President Donald Trump’s announcement of a 10 percent baseline tariff on all US imports, with additional higher duties imposed on India and several other countries. The unexpected severity of the tariffs has triggered fears of rising inflation and slower economic growth in the US.
In a note to investors, ING Bank highlighted that the adverse economic consequences of these tariffs leave the dollar “vulnerable,” causing investors to worry about a decline in confidence and economic activity. The ongoing uncertainty has also influenced market expectations regarding monetary policy.
Market analysts now anticipate that the US Federal Reserve will implement four interest rate cuts in 2025, beginning as early as June, to counterbalance the economic downturn. Additionally, the yield on the US 2-year Treasury bond has fallen to its lowest level in six months, reflecting investor concerns about slowing growth.
Asian currencies showed positive momentum on Friday, with the Korean won leading the gains. However, equity markets continued their downward trajectory, extending losses from Thursday’s session.
The rupee’s appreciation against the dollar could provide temporary relief for importers, particularly those reliant on crude oil, as lower exchange rates reduce import costs. However, a sustained strengthening of the rupee may impact export competitiveness, especially in key sectors such as IT and pharmaceuticals.
The coming weeks will be crucial for global financial markets as investors closely monitor the developments surrounding US trade policies, Federal Reserve actions, and broader economic trends. Meanwhile, the rupee’s movement will remain influenced by global cues, oil prices, and foreign capital inflows.
