Indian Rupee sees more downside as US tariffs on India set to kick in

• The Indian Rupee is exposed to more downside as US tariffs will kick in at 12:01 AM EDT or 09:31 PM IST on Wednesday.

• This month, the US increased tariffs on India to 50%, accusing the nation of funding the Russian war with Ukraine.

• Higher tariffs by the US on India will weaken the competitiveness of Indian products in the global market.

The Indian Rupee is expected to see more downside against the US Dollar (USD) as increased tariffs on imports from India to the United States (US) are set to come into effect at 12:01 AM EDT or 09:31 PM IST.

The impact of US tariffs on the USD/INR pair will be seen on Thursday as Indian markets are closed on Wednesday on account of Ganesh Chaturthi. On Tuesday, the USD/INR ended marginally higher at 87.77.

A letter by the US Homeland Security confirmed in early trade on Tuesday, stating that Washington will impose an additional 25% tariff on all Indian-origin goods, resulting in a total of 50% reciprocal duty.

Earlier this month, US President Donald Trump penalized India by increasing tariffs to 50% for buying Oil from Russia. Washington accused New Delhi of buying Russian Oil, stating that their money is funding Moscow’s defence and equipment to continue attacks on Ukraine.

In response, New Delhi released a six-point note stating that Trump’s tariffs are “unjustified and unreasonable”, and India will take all necessary steps to protect its interests and economic security.

The impact of US tariffs on India is expected to be severe on domestic exporters. Higher tariffs on Indian products by the US would weaken their competitiveness in the global market, which would force them to compromise on their selling price to withstand competition.

USD/INR technical analysis

USD/INR closed at 87.77 on Tuesday, which is 0.55% lower than its all-time high of 88.25.

The near-term trend of the pair remains bullish as it holds above the 20-day Exponential Moving Average (EMA), which trades near 8742.

The 14-day Relative Strength Index (RSI) rises above 60.00. A fresh bullish momentum would emerge if the RSI holds above that level.

Looking down, the July 28 low around 86.55 will act as key support for the major. On the upside, the August 5 high around 88.25 will be a critical hurdle for the pair.