By Jaspreet Kalra and Nimesh Vora
MUMBAI (Reuters) – The Indian rupee fell against the dollar on Monday as concerns over the economic spillovers of U.S. tariffs intensified, hurting Asian currencies and leaving rupee bears regretting their recent exits from short positions on the currency.
Investors had sharply reduced short bets on the rupee ahead of the announcement of reciprocal U.S. tariffs on April 2, per a Reuters poll, as it rallied over the last month amid seasonal and portfolio dollar inflows.
A sharply weaker dollar had also helped lift the rupee to its year-to-date high of 84.9575 last week.
The currency was under pressure on Monday after China’s retaliation to U.S. tariffs and little indication that the White House will back down, hurt risk assets globally.
The rupee was quoted at 85.6525 against the U.S. dollar at 11:15 a.m. IST, down 0.5% on the day. The offshore Chinese yuan, a closely tracked peer, was down 0.3% at 7.31.
Shorts exited at a bad time given how the U.S. tariff situation is evolving, an analyst at a Singapore-based hedge fund said, as Asian currencies are likely to struggle for a while.
Meanwhile, a key volatility gauge indicated that the cost of dollar-rupee call options relative to put options has increased, signalling a bearish bias on the local unit.
Investment bank JPMorgan last week downgraded its recommendation for emerging currencies to “underweight” after U.S. tariffs exceeded its worst-case scenario.
With the “USD catching a safe-haven bid again and all of Asia under pressure, the rupee is likely to hover between 85.25 and 86 in the near-term,” a trader at a foreign bank said.
India’s benchmark Nifty 50 was down about 4% on the day but fared better than Hong Kong’s Hang Seng index, which was down nearly 11%.
(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)
