Dollar Vs Rupee: Why is the rupee moving in reverse direction? It has reached a new all-time low

Dollar Vs Rupee: Due to the deepening fear of global trade war, investors are now avoiding taking risks and are moving towards safe investment options. This situation has also affected the Indian rupee. On Wednesday, the rupee fell 36 paise against the US dollar to close at a new all-time low of 87.43 per dollar. Foreign currency traders said that the increasing possibility of a global trade war has had a negative impact on the rupee. Market experts are worried about the effects of tariffs being imposed by the US and China on each other.

Rupee reaches record low of 87.43

The possibility of a cut in the policy interest rate by the Reserve Bank of India (RBI) and the strength of the US dollar in the foreign market also fueled the weakness of the rupee. The rupee opened with a weak start at 87.13 in the interbank foreign exchange market and reached a low of 87.49 per dollar during the day's trading. It eventually closed at 87.43, showing a decline of 36 paise compared to the previous close price.

Dollar becomes safe haven asset

On Tuesday, the rupee closed with a marginal gain of four paise at 87.07 per dollar. According to Anuj Chaudhary, research analyst at Mirae Asset Sharekhan, the rupee has fallen to its lowest level due to a possible interest rate cut in the monetary policy meeting of the Reserve Bank of India. Chaudhary said, "The rupee may trade with a negative trend amid dollar demand from importers and the ongoing uncertainty over US trade tariffs. A worsening of the tariff war situation may weaken global risk sentiment and increase dollar demand."

Impact of US-China trade war

US President Donald Trump is insisting on imposing a 10 percent duty on products imported from China. On Tuesday, China announced retaliatory tariffs on some US products and an antitrust investigation into Google. Apart from this, Trump on Monday postponed the plan to increase tariffs against Mexico and Canada for 30 days.

RBI's possible interest rate cut

Meanwhile, the dollar index, which shows the strength of the US dollar against the world's six major currencies, fell 0.35 percent to 107.58. At the same time, global oil benchmark Brent crude futures were trading 0.51 percent lower at $ 75.81 per barrel. Market experts believe that investors may exercise caution ahead of the results of the Reserve Bank of India's monetary policy committee meeting. It is expected that the RBI may cut the repo rate by 0.25 percent on Friday, which will be the first time in the last five years.

Conclusion

The growing possibility of a global trade war and the strength of the US dollar have increased the pressure on the Indian rupee. Investors' confidence is moving towards safe haven assets, due to which the rupee is seeing weakness. Also, the Reserve Bank of India's possible interest rate cut can also become a major reason for the rupee to weaken. In the coming days, the situation of the trade war and the RBI policy will determine the direction of the market.