The Indian rupee declined in the non-deliverable forward market on Thursday after the U.S. President Donald Trump slapped a 26% tariff on imports from the Asian nation.
Trump's Wednesday announcement on India was part of his wider plan to impose a 10% baseline tariff on all imports from April 5 and higher duties on certain other countries including 34% on China.
The 1-month dollar/rupee non-deliverable forward was quoting at 85.86-85.90, implying that the Indian currency is likely to open 10-15 paisa weaker when the onshore spot market opens at 9:00 a.m. IST.
The offshore Chinese yuan dropped to a one-month low of 7.3482 versus the U.S. dollar, before recovering marginally to a current rate of 7.32. The U.S. equity futures experienced a sizeable drop, and Japan led the broader Asian equity market lower.
"From the way markets have reacted, it is obvious that they had expected a way less severe outcome (on U.S. tariffs)," a currency trader at a Singapore-based bank said.
"There will be many reasons to pile on to (dollar/rupee) longs, the biggest being the (Chinese) yuan."
The 26% duty on India was based on tariff and non-tariff barriers including currency manipulation, the Trump administration said.
"They (India) are charging us 52% and we charge almost nothing for years and years and decades," Trump said at the White House while announcing the reciprocal tax.