USD/INR surges after Trump signs executive orders placing tariffs on Mexico, Canada, and China.

Indian Rupee Plunges to Fresh All-Time Low on Monday

The Indian Rupee (INR) sank to a new record low on Monday, weighed down by the Trump administration’s decision to impose tariffs on key trading partners such as China, Canada, and Mexico. A robust US Dollar (USD), persistent foreign institutional investor (FII) outflows, and a general risk-off mood in the markets further pressured the INR.

RBI Intervention and Upcoming Data Releases

Despite the downward trend, the Reserve Bank of India (RBI) is likely to step in with foreign exchange interventions to limit additional losses for the Indian currency. Later on Monday, market participants will be closely watching the US ISM Manufacturing PMI for January, which could influence short-term currency moves.

Growing Trade War Fears and Declining Forex Reserves

Concerns over a potential global trade war continue to mount, keeping the INR under selling pressure. India’s foreign exchange reserves dropped to USD 629.557 billion as of January 30, 2024, down from USD 701.176 billion on October 4, 2024.

Budget Highlights: Fiscal Deficit and Borrowing Plans

In her recent budget speech, Finance Minister Nirmala Sitharaman announced a tighter fiscal deficit target of 4.4% of Gross Domestic Product (GDP) for 2025–26, compared to the revised 4.8% for the current year. To help finance this deficit, the government has raised its gross market borrowing plan to INR 14.82 trillion (approximately USD 171.26 billion), up from INR 14.01 trillion in the previous year.

New US Tariffs Trigger Tensions

Meanwhile, the White House confirmed on Saturday that a 25% levy on Canadian and Mexican imports, alongside a 10% tax on Chinese goods, will take effect on Tuesday. Canada, Mexico, and China have vowed to retaliate, escalating fears of a broader trade conflict.

“Tariff announcement is necessary to hold China, Mexico, and Canada accountable for their promises to halt the flood of poisonous drugs into the United States,” the White House stated on X on Saturday.

By keeping track of these developments—RBI interventions, fiscal deficit targets, and shifting trade policies—investors and readers can stay informed about the factors influencing the Indian Rupee and global currency markets. For more updates on the USD/INR pair and related economic indicators, be sure to check back regularly.