Rupee rises 5 paise to 87.67 against US dollar in early trade

Mumbai: The rupee traded in a narrow range and appreciated 5 paise to 87.67 against the US dollar in early trade on Thursday, after US President Donald Trump slapped an additional 25 per cent duty -- doubling it to 50 per cent -- on Indian goods over New Delhi's continued imports of Russian oil.

Forex traders said Trump's aggressive move, which kicks in 21 days, threatens to raise total duties on select Indian exports to as high as 50 per cent -- making them among the most heavily taxed US imports globally.

At the interbank foreign exchange, the domestic unit opened at 87.69 against the US dollar then touched an initial high of 87.67, higher by 5 paise over its previous close.

On Wednesday, the rupee rebounded from a record low level and closed 16 paise higher at 87.72 against the US dollar.

Trump's tariffs on Indian exports are likely to hit sectors such as textiles, marine and leather exports hard and was slammed by India as "unfair, unjustified and unreasonable".

With this action singling out New Delhi for the Russian oil imports, India will attract the highest US tariff of 50 per cent along with Brazil.

The United States has imposed this additional tariff or penalty for Russian imports only on India while other buyers such as China and Turkey have so far escaped such harsh measures. The 30 per cent tariff on China and 15 per cent on Turkey is lower than India's 50 per cent.

"The escalation adds to concerns over the economic impact. If no breakthrough happens within the 21-day window, FY26 GDP growth may have to be revised below 6 per cent, factoring in a 40–50 basis point hit -- twice the earlier estimate from tariff effects," CR Forex Advisors MD Amit Pabari said.

Pabari further noted that amid these rising tensions and economic concerns, the rupee remains vulnerable and could see further downside as uncertainty continues to mount.

Meanwhile, the Reserve Bank of India opted to hold the repo rate steady at 5.50 per cent and retained a neutral stance during its latest policy review.

"The decision suggests policymakers are adopting a wait-and-watch approach as they weigh the uncertain trade backdrop against an already slowing global economy," Pabari said, adding that the room for manoeuvre is tightening.

India's foreign exchange reserves fell by $9.3 billion to $688.9 billion as of August 1, reflecting Central Bank’s active rupee defence operations amid rising external stress, he said.

Meanwhile, Brent crude prices rose 0.99 per cent to $67.55 per barrel in futures trade.

The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.04 per cent to 98.21.

In the domestic equity market, Sensex dropped 335.71 points to 80,208.28 in early trade, while the Nifty declined 114.15 points to 24,460.05.

Foreign institutional investors (FIIs) offloaded equities worth Rs 4,999.10 crore on a net basis on Wednesday, according to exchange data.