On April 7, 2025, the Indian rupee experienced a significant decline, closing at 85.8350 per U.S. dollar, marking its sharpest single-day drop in nearly three months. This depreciation was primarily driven by heightened global market volatility resulting from U.S. President Donald Trump's announcement of potential new tariffs on Chinese imports. The ensuing trade tensions led to a sell-off in Asian equities, with Hong Kong shares plummeting 9%, further exerting pressure on the rupee.
The rupee's decline was also influenced by a strengthening U.S. dollar and rising crude oil prices, which added to the currency's woes. Additionally, subdued domestic equity markets contributed to the rupee's depreciation, as investors reacted to the economic implications of the proposed tariffs.
Looking ahead, analysts suggest that the rupee may continue to face challenges, especially if China allows its currency, the yuan, to weaken in response to the tariff threats. This scenario could lead to further depreciation of the rupee due to capital outflows and increased demand for safe-haven assets. Market participants will be closely monitoring developments in trade negotiations and their impact on currency markets in the coming days