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The rupee depreciated 67 paise to hit record low of 87.29 against the US dollar in early trade on Monday after Trump Tariffs on Canada, Mexico and China triggered fears of a broad trade war.
Donald Trump slapped Canada and Mexico with 25 per cent duties and China with a 10 per cent duty, The move was the first strike in what could usher a destructive global trade war, forex traders said.
The rupee continued to face pressure due to sustained foreign fund outflows and the broad strength of the American currency in the overseas markets due to unabated dollar demand from oil importers and weak risk appetite, they added.
At the interbank foreign exchange, the rupee opened at 87.00 and slipped further to 87.29 against the greenback in initial deals, a plunge of 67 paise from its previous close.
On Friday, the rupee settled flat at 86.62 against the American currency.
"The start of the week saw financial markets on edge as US President Donald Trump followed through on his tariff threats, imposing duties on imports from Mexico, Canada, and China," CR Forex Advisors MD- Amit Pabari said.
This escalating trade war has fuelled risk aversion, propelling safe-haven demand for the US dollar, which has surged toward 109.50 levels, Pabari added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 1.30 per cent higher at 109.77.
"The US dollar surged on Trump Tariffs sending global FX to multi-year lows as the Euro fell to 1.0224, GBP to 1.2261 and Yen to 155.54. The US dollar index rose to 109.77, while US 10-year yields were at 4.4980 per cent.
"Amongst Asian currencies Yuan slumped to 7.3551, IDR to 16448 and KRW to 1470," said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.
Brent crude, the global oil benchmark, rose 0.71 per cent to USD 76.21 per barrel in futures trade.
"The range for the day is expected to be between 86.65/87.00 with the Reserve Bank expected to intervene to cool off the dollar bids," Bhansali said.
In the domestic equity market, the 30-share BSE Sensex was trading 575.89 points, or 0.74 per cent, lower at 76,930.07 points, while the Nifty was down 206.40 points, or 0.88 per cent, at 23,275.75 points.
Foreign institutional investors (FIIs) offloaded equities worth Rs 1,327.09 crore in the capital markets on a net basis on Saturday, according to exchange data.
Meanwhile, India's forex reserves increased USD 5.574 billion to USD 629.557 billion in the week ended January 24, the Reserve Bank said on Friday.
In the previous reporting week, the overall kitty had dropped USD 1.888 billion to USD 623.983 billion.
The reserves have been on a declining trend for the last few weeks, and the drop has been attributed to revaluation, along with forex market interventions by the Reserve Bank of India (RBI) to help reduce volatilities in the rupee.
(Except for the headline, this story has not been edited by News Agency staff and is published from a syndicated feed.)