NEW DELHI: The rupee reached an unprecedented low on Friday, dropping past the 88-per-dollar mark for the first time in history. The decline came amid heightened worries in the market over the impact of stiff U.S. tariffs on India’s exports.
The local currency hit a low of 88.29 to the dollar, surpassing its prior record of 87.95 set in February. According to traders, an intervention by the central bank through dollar sales helped in the partial recovery of the rupee. Rupee closed the Friday trading session at a record low of 88.20 against the dollar. On Thursday, it had settled at 87.62/$.
Kunal Sodhani, Head- Treasury at Shinhan Bank said that outflows from equity markets (August equity outflows are to the tune of INR 29,000 crore and July equity outflows around INR 17,000 crore.), Trump’s tariff pressure on India, the month-end oil demand and Rupee-Yuan dynamics are all creating pressure on the Rupee. He added that the US imposition of an additional 25% tariff on Indian goods means double the total duties faced by the South Asian nation to 50%.
The rupee weakened to a new all-time low against the Chinese yuan on Friday. The rupee dropped to 12.3862 against the offshore yuan on Friday.
In the last four months, the Rupee has fallen by around 6% against the Chinese Yuan. The yuan-rupee exchange rate is crucial for India’s trade competitiveness, as both countries compete directly in U.S.-bound sectors such as textiles, engineering goods, and chemicals.
“A weaker rupee against the yuan makes Indian exports relatively cheaper than Chinese goods, helping to slightly curtail the impact of higher U.S. tariffs and also helps in narrowing India’s trade deficit with China,” stated Sodhani.
The tariffs are expected to dent India’s growth story. According to economists, the 50% tariffs imposed by the United States on Indian goods could trim between 60 and 80 basis points from India’s GDP growth rate if the tariffs remain in effect for an entire year.
Sodhani added, “All the low of Rupee of 87.95 levels has finally been broken after which several stop losses got triggered, and going ahead weakness may persist for some time. For USDINR, positionally, 87.20 may now act as a base with levels open to test 88.90. RBI continues to hold decent FX reserves and may look forward to curtail any kind of excessive volatility by their interim interventions but may not look to hold or eye any particular level.”
So far in 2025, the rupee has declined around 3% against the US dollar, making it the lowest-performing currency in Asia this year.