Informist Poll
Tariff war may drag rupee dn slightly to 85.75/$1 by Apr-end
This story was originally published at 20:56 IST on 3 April 2025
Register to read our real-time news.Informist, Thursday, Apr. 3, 2025
By Pratiksha
NEW DELHI – After a strong run in March, the rupee may weaken slightly against the dollar in April owing to the impact of US President Donald Trump's sweeping reciprocal tariffs on major trading partners, including India. However, broad-based weakness in the US dollar and sustained foreign fund inflows into Indian debt may keep a lid on the local currency's losses, poll respondents said.
According to the median of estimates of 17 respondents from banks, brokerages, and corporates polled by Informist, the Indian unit may settle at 85.75 a dollar by the end of April, after ending March at 85.47.
Early Thursday, Trump announced tariffs against all major trading partners, calling it a 'Liberation Day' for the US. Trump slapped a 27?justed tariff on imports from India even as bilateral trade talks continue. The reciprocal tariffs will take effect from Wednesday.
Market participants said the weak risk sentiment among investors owing to uncertainty around the implementation of the reciprocal tariffs may keep the Indian unit under pressure. "This (impact of US tariffs) is still an evolving condition. A lot depends on the shape and form of our bilateral trade agreement with the US and what sort of concessions India will have to make in terms of reducing import duties and commitment towards greater imports from the US in certain segments," said Sakshi Gupta, principal economist at HDFC Bank Ltd.
The Indian currency will, however, draw comfort from broad-based weakness in the dollar index, poll respondents said. The dollar index is expected to remain weak as the tariffs and recent economic data have stoked widespread worries of a recession in the world's largest economy. After the announcement of the reciprocal tariffs, the dollar index tumbled over 1.5% on Thursday to a six-month low. Market participants expect the dollar index to fall to 98-100 in the near term from 101.54 at 1950 IST on Thursday.
Sustained foreign fund inflows, particularly into the Indian debt market, may also be another source of support for the Indian currency this month. However, the quantum of inflows could vary amid the prevailing uncertainty on the global front, poll respondents said.
In March, foreign investors bought nearly $4 billion of Indian equities and bonds, a significant reversal from approximately $11 billion of outflows in January and February combined. FPIs have been investing in Indian debt on expectations of a 25-basis-point repo rate cut by the Reserve Bank of India's Monetary Policy Committee on Wednesday.
Market participants expect the RBI to continue allowing sharp movement in the rupee's exchange rate with its hands-off intervention strategy. This was reflected in the poll estimates, which were in a wide range of 84.50-86.50 per dollar.
"The new RBI Governor Sanjay Malhotra has adopted a more flexible approach, stating that the central bank will allow the rupee to move freely along with other emerging market currencies," said Gaurav Sharma, associate VP & head of research at Globe Capital Market Ltd. "This change in RBI stance will make dollar/rupee more volatile going forward."
On the whole, even though the currency market finally has some visibility on the tariffs that Trump has been threatening for months and several positive factors are lining up, traders continue to be on the edge and are braced for unexpected moves.
POLL DETAILS
|
Participant |
Apr-end |
Jun-end |
|
Bank of Baroda |
85.50-86.00 |
-- |
|
CR Forex |
86.00 |
84.50-84.80 |
|
CSB Bank |
85.75 |
86.25 |
|
Finrex Treasury Advisors LLP |
86.00 |
85.75 |
|
Globe Capital Market |
84.50-86.30 |
84.20-86.50 |
|
HDFC Bank |
85.50-86.00 |
-- |
|
HDFC Securities |
84.70-86.30 |
84.40-86.70 |
|
ICBC |
85.75-86.00 |
-- |
|
IDFC FIRST Bank |
86.00 |
-- |
|
Karur Vysya Bank |
86.20 |
|
|
Kotak Mahindra Bank |
85.35-85.75 |
-- |
|
Kotak Securities |
86.00 |
-- |
|
Large brokerage firm |
85.00-86.20 |
-- |
|
Large engineering company |
86.50 |
86.50 |
|
LKP Securities |
84.75-85.00 |
84.50 |
|
Shinhan Bank India |
84.75-86.20 |
85.20-87.00 |
|
UCO Bank |
86.50 |
86.50 |
|
Median |
85.75 |
85.75 |
End
US$1 = INR 85.43
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
With inputs from Sourabh Kumar and Gowri Lakshmi
Edited by Deepshikha Bhardwaj
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