Rupee slips to 85.89 vs US dollar as Trump’s tariff push spooks markets

The rupee fell 19 paise to 85.89 against the US dollar after Donald Trump proposed steep tariffs on Canadian imports. Market jitters followed, capping rupee strength. India-US trade talks continue, with efforts to finalise the first phase by October.

Mumbai: The rupee depreciated 19 paise to 85.89 against the US dollar in early trade on Friday, after Trump announced 35 per cent tariffs on Canada from next month, denting investor sentiments.

At the interbank foreign exchange, the rupee opened at 85.76 against the dollar, then touched an early low of 85.89, down 19 paise from its previous close.

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On Thursday, the rupee pared initial gains and settled for the day higher by 3 paise at 85.70 against the US dollar.

Trump on Thursday announced a steep 35 per cent tariff on Canadian imports, effective August 1. He further signalled blanket tariffs of 15-20 per cent on most US trade partners, hinting that the European Union and Canada may receive their own “tariff letters” shortly.

“Such moves raise inflationary risk-ironically pushing rate cuts even further out of reach. And while India has so far escaped direct tariff action, the broad-based nature of Trump’s tariff crusade has markets on edge,” CR Forex Advisors MD Amit Pabari said.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.15 per cent to 97.79.

Brent crude, the global oil benchmark, rose 0.28 per cent to USD 68.83 per barrel in futures trade.

“Given the current backdrop, the bias for rupee appreciation remains limited. Support near 85.50 continues to hold strong, with a high probability of the pair inching back towards 86.00. A sustained move above 86.00 could quickly open the path towards 86.20-86.50, with momentum likely to pick up in no time,” Pabari added.

Meanwhile, in the domestic equity market, the Sensex declined 234.74 points or 0.28 per cent to 82,955.54, while Nifty fell 58.55 points or 0.23 per cent to 25,296.70.

Foreign institutional investors (FIIs) purchased equities worth Rs 221.06 crore on a net basis on Thursday, according to exchange data.

Meanwhile, India is trying to negotiate and finalise a trade agreement with the US, Special Secretary in the Department of Commerce Rajesh Agrawal said on Thursday.

Agrawal is also the chief negotiator of the proposed India-US bilateral trade agreement.

The aim is to conclude the first phase of this pact by fall (September-October) of this year. Before that, the two countries are looking to finalise an interim trade agreement.

An Indian commerce ministry team will soon visit Washington for another round of talks on the proposed trade agreement with the US to iron out differences in sectors, like agriculture and automobiles, a government official said on Thursday.

“We are not differentiating between an interim or the first phase of the bilateral trade agreement. We are negotiating a complete deal. Whatever will be finished, we can package it as an interim deal and for the rest, talks will continue,” the official said.