The rupee closed at 86.5225 against the dollar, down 0.2% on the day, its biggest one-day percentage fall since Jan. 16.
Asian currencies were mostly weaker, with the offshore Chinese yuan down 0.4% at 7.28, while the dollar index rose 0.1% to 107.9.
The dollar gained after the Financial Times reported that U.S. Treasury Secretary Scott Bessent has been pushing for new universal tariffs on U.S. imports to start at 2.5% and rise gradually by the same amount each month.
Trump’s comments on imposing tariffs on U.S. copper and aluminium imports also supported the dollar.
On Monday, the dollar index had declined to an over five-week low of 106.96 amid a selloff in U.S. tech stocks. With Trump’s return to the White House, “volatility is set to persist in markets and the rupee is unlikely to stay untouched,” a trader at a foreign bank said. In addition to tariffs concerns, persistent outflows have also been a pain point for the rupee, with foreign investors pulling out over $8.5 billion from local stocks and bonds so far in January.
Meanwhile, dollar-rupee forward premiums dropped on Tuesday after the Reserve Bank of India announced a spate of measures to ease a liquidity crunch. The 1-year dollar-rupee implied yield declined 11 basis points to 2.17%.
The central bank’s “liquidity easing is a likely precursor to rate cuts,” Nomura said in a note. The measures “confirm that there has been a regime shift at the RBI, with the prioritisation of domestic rates over FX and a more flexible relative approach to managing the currency.”
