FX.co ★ Rupee Approaches Record Low on US Tariffs

In August, the Indian rupee depreciated beyond the 87.7 mark against the US dollar, marking its lowest point since the record decline to 88 observed in late February. This downturn comes amid a deteriorating trade outlook with the United States and a dovish stance from the Reserve Bank of India (RBI). US President Trump implemented a 25% tariff on Indian goods at the beginning of the month after India failed to secure an agreement with US officials. Additionally, Trump issued a warning of potential increased tariffs on certain sectors if India did not cease the purchasing and re-exporting of Russian energy products. In response, Prime Minister Modi asserted that Indian businesses would procure the most advantageous inputs amid an unpredictable economic environment. On the monetary policy front, consumer inflation dropped to a six-year low of 2.1%, falling short of market expectations and testing the lower threshold of the RBI's inflation tolerance band set at 2%. Consequently, there is an expectation in the market that the RBI will persist in lowering its benchmark policy rate throughout the year.