Indian rupee falls to lowest since August 8 on US 50% tariffs

Dubai: The Indian rupee fell to 23.88 to a dirham – its lowest point since August 8 – as the deadline for the 50% US tariffs on Indian exports to that country starts August 27.

The possibility of the rupee dropping to 24 against dirham for the first time has escalated, which will also create new possibilities for Indian expats in the UAE and other Gulf markets with the September remittances just days away.

“September remittances will be especially high, given that it’s also the festival season in key markets such as Kerala, which is marking Onam,” said a top official at a currency exchange house.

Leading remittance fintechs in the UAE such as Botim and Comera are having exchange rates of 23.82 and 23.85, respectively, while e& is offering 23.84 to a dirham. Exchange houses have pegged it at 23.8.

"Throughout August, the dirham to rupee has been extremely favourable for Indian expats in the UAE," said Neelesh Gopalan, Treasury Manager at a Dubai remittance platform. "The rate that Indian expats in UAE should watch out for is 23.9 levels, which was there on August 4.

"And, obviously, if the latest rupee weakness leads to a drop to 24 against dirham."

The new US tariffs – the base 25% plus another 25% for India importing oil from Russia – come at a crucial time for the India economy. Indian businesses with sizable US exports are scrambling to find ways to counter the high tariffs.

As for the Indian government, it has been steadfast in countering the US push to cut oil imports from Russia.

Today (August 26), Indian stocks too are feeling the heat from the impending US double tariffs. The Sensex is down nearly 552 points to 81,053, while the Nifty is 164 points lower to 24,804.

The Sensex had been running positive in recent days, with the upcoming changes to the GST (Goods and Service Tax) being a key impetus. The details on the sort of GST rate cuts will be announced early September.

"With President Trump’s additional 25% tariff on Indian imports taking effect, the rupee remains vulnerable to further depreciation towards 88," said Subramanian Sharma, founder of Mumbai-based Greenback Advisory Services.

"But much of the impact appears to have been priced in, as evidenced by $2.4 billion in equity outflows - and the RBI expected to step in to curb excessive weakness.

"On the supportive side, PM Modi’s proposed GST reforms, S&P’s recent credit rating upgrade, and India’s scheduled inclusion in the FTSE bond index from September are likely to underpin rupee strength over the medium term," added Sharma.

More to follow...