Why Indian Rupee Slides to 87 Per US Dollar For First Time?

On Monday, February 3, the Indian rupee dipped below the 87 per dollar threshold for the first time in history, falling from its previous close of 86.61/$ on January 31. This drop came amid rising global trade tensions following new tariffs imposed by US President Donald Trump on Mexico, Canada, and China.

Tariffs Imposed by US

Trump’s executive orders introduced a 25% tariff on Mexican and most Canadian imports, as well as a 10% tariff on Chinese goods. In response, Mexico and Canada implemented retaliatory measures, while China signalled potential counteractions. The offshore Chinese yuan, which is closely followed by rupee traders, weakened by 0.54% to 7.3585 per dollar, further intensifying pressure on emerging market currencies.

Meanwhile, the US dollar strengthened against major currencies, and US Treasury yields increased. The rupee’s decline mirrored these developments, with traders closely monitoring global market trends for further indications.

Upcoming RBI Monetary Policy

The Reserve Bank of India (RBI) is set to announce its policy decision on Friday, February 7, with expectations of a 25-basis-point rate cut. On January 31, the benchmark 10-year bond yield ended at 6.7001%, slightly lower for the week.

The government has set a lower fiscal deficit target of 4.4% of GDP for FY26, down from 4.8% in the current fiscal year. However, it raised gross borrowing to ₹14.82 lakh crore for the coming year, up from ₹14.01 lakh crore this year.

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