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The rupee breached the key 87 per dollar mark on Monday as the dollar strengthened after US President Trump slapped tariffs on Canada, Mexico and China.
The dollar index surged by 1.35 per cent to 109.83. It measures the strength of the greenback against a basket of six major currencies.
The rupee was trading at 87.16 per dollar at 10:31 IST.
“The fear of tariffs has come true. There is safe haven demand,” said a dealer at a state-owned bank.
Market participants said that the rupee might remain under pressure in the near term as the RBI has reduced the amount of intervention in the foreign exchange market.
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“Indian rupee falls to its lowest as Trump Tariffs kill global market and risk aversion takes a toll on all assets including gold and Crypto. Dollar reigns supreme being a safe asset,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
Brent crude oil rose toward $76 per barrel as US tariffs on Canada, Mexico, and China fuelled supply concerns. However, crude prices may face downward pressure as trade tensions escalate, potentially slowing global growth and weakening energy demand, said market participants.
Meanwhile, the government bond yields remained steady at 6.67 per cent.
“The optimism on the back of the budget has been compromised due to rise in US yields,” said a dealer at a state-owned bank.
