The Indian rupee (INR) slumped to a three-week low against the U.S. dollar on Wednesday, mirroring the decline in the Chinese yuan (CNY) as new U.S. tariffs, including a steep 104% levy on China, fueled fears of a global economic slowdown.
Key Highlights:
- The rupee closed at 86.6875 per USD, down 0.5% for the day.
- The offshore yuan hit a record low, dragging Asian currencies lower.
- The Reserve Bank of India (RBI) cut interest rates for the second straight time to support growth.
- U.S. Treasury yields surged, raising concerns over a broader market sell-off.
RBI Eases Policy as Trade War Risks Loom
The RBI reduced its repo rate and shifted to an accommodative stance, signaling further cuts to counter slowing growth. Analysts warn that yuan volatility and trade war tensions remain major risks for the rupee.
“The yuan’s moves and global financial uncertainty are key downside risks for the rupee. We believe the RBI is unlikely to engineer any underperformance of the currency,” said ANZ in a note.
Global Market Turmoil Hits Indian Stocks & Bonds
- Indian equities (Sensex & Nifty 50) ended lower.
- Government bonds outperformed regional peers despite a U.S. Treasury sell-off.
- 10-year U.S. Treasury yields surged to 4.515%, reflecting investor anxiety.
“The ‘sell America’ scenario is becoming tangible again as Treasuries and U.S. equities face pressure,” noted ING Bank analysts.
What’s Next?
With India’s markets closed Thursday for a holiday, traders will watch for:
- Further yuan depreciation and U.S.-China trade developments.
- RBI’s next moves amid slowing growth and inflation concerns.
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