The Indian rupee weakened to end at a record closing low against the US dollar following Donald Trump's threat to impose a 100% tariff on the BRICS countries if they don't continue using the dollar. Slowing economic growth also weighed on the domestic currency.
The domestic unit depreciated 21 paise to trade at a record closing low of 84.70, after opening flat at 84.59 against the US dollar, according to Bloomberg data. The Indian rupee fell as much as 22 paise to 84.71 during the session against the greenback.
Trump demanded a “commitment” from BRICS nations that they will not create a new currency as an alternative, or endorse any other currency to replace the dollar.
“We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US dollar or, they will face 100% tariffs, and should expect to say goodbye to selling into the wonderful US economy,” Trump said in a social media post on Saturday.
The dollar index—which tracks the greenback's performance against a basket of 10 leading global currencies—was trading 0.3% higher at 106.3.
The Indian currency was also weighed by a continued outflow of domestic stocks. The FPIs offloaded stocks worth approximately Rs 4,383.55 crore on Friday to end November with an outflow of Rs 21,612 crore, according to data on National Securities Depository Ltd.
The weakening of the currency comes after the country's economic growth grew at the slowest pace in nearly two years, adding pressure to the central bank policy meeting due later this week. The gross domestic product grew 5.4% in the July-September quarter, compared to 6.7% in the April-June quarter.
Historically, the rupee has shown an impressive track record in December, appreciating 70% of the time over the past decade, according to Amit Pabari, managing director, CR Forex Advisors. "However, the current landscape suggests a challenging road ahead."
Unless the currency decisively breaks below 84.20, it may remain under pressure in the near term with the short term range expected to be of 84.20 to 84.60, Pabari said.
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