Market News

By Jaspreet Kalra and Nimesh Vora

MUMBAI, March 24 (Reuters) - The rupee's rally, which has made it the best-performing major Asian currency this month, is underestimating India's vulnerability to reciprocal U.S. tariffs, analysts said.
Foreign inflows and position unwinding have boosted the rupee, which is on track for its best monthly performance in nearly four years.

On Monday, the rupee rose slightly to 85.90 against the U.S. dollar, bringing its month-to-date advance to just under 2%.

However, the rally does not factor in the volatility that possible U.S. tariffs slated for next week might unleash, analysts said.
The dollar/rupee pair is underpricing the risk from U.S. President Donald Trump’s reciprocal tariffs specifically for India, MUFG Bank said in a note, adding that the risk-reward may be tilted towards a weaker rupee.

The White House is set to announce reciprocal levies on many countries on April 2. President Trump said in a recent interview that India will face the same level of tariffs that it imposes on imports from the United States.

U.S. manufacturing exports to India, valued at nearly $42 billion in 2024, face high tariff rates ranging from 7% on wood products and machinery to 15% to 20% on footwear and transport equipment, and nearly 68% on food items.
In a worst-case scenario of a uniform tariff hike of 10% on all goods and services imported from India by the United States, India's economy could take a hit of 50 basis points to 60 basis points, per estimates by Standard Chartered Bank economists.

"You have big uncertainty looming and I think the market, for the moment, is brushing it aside," a senior treasury official at a bank said.