USD/INR rallies as Trump threatens 10% Anti-American tariff on BRICS
- The Indian Rupee slumps against US Dollar as Trump threatens to impose 10% on countries supporting BRICS’ anti-American policies.
- Trump prepares to send letters, outlining tariff rates, to nations that fail to secure trade deal during the tariff deadline.
- Traders pare Fed dovish bets on upbeat US NFP data.
The Indian Rupee declines significantly against the US Dollar (USD) at the start of the week. The USD/INR pair advances to near 86.15, the highest level seen in a week, as United States (US) President Donald Trump threatens in a post on Truth.Social that he will impose additional 10% tariffs on countries that align with BRICS’s anti-American policies, with the specification that there would be no expectations.
This came after BRICS nations condemned unilateral tariffs and non-tariff barriers that are disturbing global trade and are inconsistent with World Trade Organization (WTO) rules in the Rio declaration. However, nations didn’t specify the US while expressing concerns over unilateral trade barriers.
India, being a founding member of BRICS, is not immune to new Trump tariffs’ threats and could see some disruption in ongoing trade negotiations with the US.
No confirmation about striking a deal between the US and India ahead of the reciprocal tariff deadline on Wednesday, even as Washington expressed confidence on July 3 that it could reach a deal with New Delhi within 48 hours, which was supposed to be July 5, has raised concerns over the finalization of the trade pact.
A report from the NDTV showed on Thursday that India and the US can announce a trade agreement within "48 hours".
Indian Rupee PRICE Today
The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.43% | 0.49% | 0.71% | 0.59% | 0.96% | 0.60% | 0.49% | |
| EUR | -0.43% | 0.08% | 0.05% | 0.15% | 0.59% | 0.41% | 0.05% | |
| GBP | -0.49% | -0.08% | -0.04% | 0.09% | 0.53% | 0.14% | -0.15% | |
| JPY | -0.71% | -0.05% | 0.04% | 0.11% | 0.46% | 0.31% | -0.17% | |
| CAD | -0.59% | -0.15% | -0.09% | -0.11% | 0.37% | 0.30% | -0.24% | |
| AUD | -0.96% | -0.59% | -0.53% | -0.46% | -0.37% | -0.13% | -0.66% | |
| INR | -0.60% | -0.41% | -0.14% | -0.31% | -0.30% | 0.13% | -0.37% | |
| CHF | -0.49% | -0.05% | 0.15% | 0.17% | 0.24% | 0.66% | 0.37% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Indian Rupee from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent INR (base)/USD (quote).
Daily digest market movers: Indian Rupee underperforms its peers
- The Indian Rupee weakens against the US Dollar on Monday. The US Dollar trades broadly stable as investors await news alerts about how much US President Trump will impose additional tariffs on those nations that fail to close a trade deal before the deadline.
- During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades calmly near 97.00, slightly higher from a fresh multi-year low of 96.40 posted last week.
- Over the weekend, Donald Trump stated that he will release letters outlining tariffs for 12 countries on Monday. Trump said the first batch of letters outlining the tariff levels they would face on exports to the United States would be sent to 12 countries on Monday, Reuters reported.
- Investors should brace for significant volatility if the US sends letters to any of its leading trading partners. So far, Trump has announced bilateral deals with the United Kingdom (UK) and Vietnam and a limited trade pact with China. Given that Washington has not announced any deal with the Eurozone, Japan, Canada, and Mexico, tariff letters to them will be unfavorable for the US Dollar and US assets.
- Meanwhile, the passage of Trump’s “Big Beautiful Bill” has prompted fiscal risks for the US Dollar as it is expected to add over $3 trillion to the already ballooning nation’s debt over a decade. However, US equities have performed strongly over Trump’s bill clearance, assuming that higher liquidity with households will boost consumption.
- On the monetary policy front, upbeat US nonfarm Payrolls (NFP) data for June has forced traders to pare bets supporting the Federal Reserve (Fed) to cut interest rates in the policy meeting later this month. According to the CME FedWatch tool, the probability of the Fed cutting borrowing rates in July has diminished to 4.7% from 18.6% seen a week ago.
Technical Analysis: USD/INR returns above 20-day EMA
The USD/INR pair posts a fresh weekly high near 86.15 on Monday and returns above the 20-day Exponential Moving Average (EMA), which trades around 85.90. This suggests that the near-term trend of the pair has turned bullish.
The 14-day Relative Strength Index (RSI) rebounds above 50.00. A fresh bullish momentum would emerge if the RSI breaks above 60.00.
Looking down, the May 27 low of 85.10 will act as key support for the major. On the upside, the June 24 low at 86.42 will be a critical hurdle for the pair.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
