The rupee closed at 84.3275 against the U.S. dollar, compared to its previous close of 84.2875.
Trump said he would impose a 25% tariff on imports from Canada and Mexico and outlined “an additional 10% tariff, above any additional tariffs” on imports from China in a social media post.
The dollar climbed to its highest level against the Chinese yuan in four months following Trump’s comments, while the Mexican peso and Canadian dollar declined 1.2% and 0.8%, respectively.
“Although the final outcome of the tariff threat may be less severe once negotiations are concluded, we recommend adopting a defensive stance in FX markets for the time being,” ING Bank said in a note.
While residual inflows related to the rejig of MSCI’s global equity indexes helped the rupee rise a near-three-week high of 84.23, it shed most of its gains later in the session. Dollar bids were present through the day but the rupee started to weaken once foreign banks’ dollar sales dissipated, a trader at a private bank said. It’s “quite likely that the pullback seen on Monday and Tuesday won’t persist and it (USD/INR) will rise above 84.45 by tomorrow or day after,” the trader added.
Investors now await the release of minutes from the Federal Reserve’s November meeting, the first one after the outcome of the U.S. election, to gauge policymakers’ thinking on the future path of benchmark interest rates.
The odds of a 25-basis point rate cut in December currently stand at almost 60%.
