Mumbai: The Indian rupee fell sharply by 51 paise on Tuesday to settle at 87.23 against the US dollar due to month-end dollar demand by importers and oil marketing companies, covering of short positions due to the expiry of the futures contract, uncertainty over US trade tariffs, and outflows from foreign portfolio investors. It was the rupee’s worst day in the last three weeks.At the interbank foreign exchange, the rupee opened weak at 86.83 and kept losing ground through the day before settling at 87.23, that is 51 paise lower than its previous close. The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.04 per cent to 106.64. Brent crude, the global oil benchmark, declined 0.12 per cent to $74.69 per barrel in futures trade.A weak rupee makes foreign education and outbound tourism expensive. Over the past six months, the Indian rupee has depreciated by nearly 4 per cent, weakening from ₹83.75 per dollar in August 2024 to ₹86.95 per dollar as of February 2025. At one point, it even dipped to ₹87.95, making overseas education significantly more expensive. Since tuition fees at US universities remain unchanged in dollar terms, Indian students must now pay considerably more in rupee terms, straining family budgets. Beyond tuition, living expenses, rent, and daily necessities have also surged due to the weaker rupee.As far as trade is concerned, a weaker rupee is good for exports but unfavorable for imports. Due to the trade deficit, the net impact will be negative for India. The higher costs on components and raw materials will make goods costlier across sectors, including electronics, engineering equipment, mobile phones, and pharmaceuticals. Some segments that would benefit include ready-made garments and agricultural products. Pricier crude oil will lead to inflation across products.The US President Donald Trump restricted Chinese investments in strategic areas and announced that tariffs on Canada and Mexico will start next week.Anil Bhansali, Head of Treasury at Finrex Treasury Advisors, said, “In the afternoon trade, the rupee went from 87 to 87.22 in less than two minutes as possibly RBI was buying dollars to cover its short position. According to estimates, the RBI may have bought around $2.5 billion to $3 billion to cover its short position. Also, importers and oil companies were buying dollars to meet month-end dollar demand. Thirdly, FPIs sold stocks worth ₹4,000 crore, and there were no inflows.”“The outlook for the rupee is bearish. With the rupee being slightly overvalued in February, we expect it to trade around 86.88 in a broad range and between 86.50 to 87.50 in a narrow range for the next month,” added Bhansali.Rahul Kalantri, VP – Commodities, Mehta Equities Ltd, said, “The drop in the rupee against the dollar came after US President Trump’s statement on tariffs related to Mexico and Canada. Add to this, a fresh sell-off in domestic equity markets by FPIs further pressured the rupee. We expect the rupee to remain volatile, with the pair trading in the range of 86.65-87.70 this week.”
Source link
