Quote on Rupee vs Dollar by Anindya Banerjee, Head Currency and Commodity Research, Kotak Securities
Below the Quote on Rupee vs Dollar by Anindya Banerjee, Head Currency and Commodity Research, Kotak Securities
The USDINR is trading in a narrow range today, with spot prices steady near 87.70, likely due to significant intervention by the Reserve Bank of India and weak US Dollar Index. Market sentiment remains weak amid continued foreign portfolio investor (FPI) outflows from Indian equities. Since the US elections in November last year, we have held the view that under President Trump's current term, trade conflicts would escalate, as the "America First" policy drives de-dollarization and global economic decoupling. Current events are unfolding in line with this trajectory.
A 25% tariff on certain Indian imports has already come into effect, and an additional 25% tariff is scheduled to be implemented about three weeks from now. This phased tariff approach leaves room for negotiations, but ultimately, higher tariffs are likely to impact the US more than India. The US economy, which is primarily consumption-driven with a relatively small industrial base, will bear the brunt of elevated tariffs.
The weighted average tariff rate is now above 20% in US, a level not seen since the 1930s when the US dollar was not yet the global reserve currency. For US consumers, these tariffs resemble a consumption tax, which could dampen growth and potentially push the economy toward a deep recession if such policies persist. Sustained high tariffs also risk isolating the US on the world stage and accelerating economic decoupling alongside BRICS+ nations.
In the near term, USDINR will be influenced by FPI flows, RBI interventions, and the broader trend of the US dollar overseas. We anticipate USDINR to trade within a range of 87.40 to 88.30. A weakening US Dollar Index may provide some cushion to the Indian rupee.
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