The Indian rupee depreciated by 23 paise to 85.73 against the US dollar in early trade on April 2, 2025, marking a weak start to the new financial year. Concerns over rising crude oil prices and potential reciprocal tariffs imposed by the US have added pressure on the currency.

At the interbank foreign exchange market, the rupee opened at 85.65 per dollar but quickly lost ground to settle at 85.73, falling from its previous close of 85.50 on March 28.

Market Closure and Previous Performance

• April 1, 2025: The forex and bond markets were closed for the annual account closing of banks.

• March 31, 2025: Stock, money, commodity, and derivative markets were shut due to Eid-Ul-Fitr.

• Financial Year 2024-25: The rupee depreciated by over 2% compared to the previous year.

• April 2, 2024: The rupee stood at 83.42 per US dollar, indicating a significant weakening over the past year.

Factors Influencing Rupee Depreciation

1. Rising Crude Oil Prices

The global crude oil benchmark, Brent crude, rose to $74.51 per barrel, adding further strain on the Indian rupee. Since India is a major oil-importing nation, higher crude prices increase import costs, leading to a widened trade deficit and depreciation of the rupee.

2. Concerns Over Reciprocal Tariffs by the US

US President Donald Trump has frequently criticized India’s tariffs on American goods and has proposed a set of reciprocal tariffs. He termed April 2 as "Liberation Day" for the US, indicating the potential rollout of these new tariffs.

If imposed, these tariffs could:

• Increase trade tensions between India and the US

• Reduce exports from India, further weakening the rupee

• Impact investor sentiment in forex markets

Forex experts suggest that any clarity on these tariffs will be crucial in determining the rupee’s trajectory in the coming weeks.

Forex Market and Investor Sentiment

• Dollar Index: The dollar index, which measures the greenback’s strength against six major currencies, stood at 104.19, slightly lower by 0.06%.

• Foreign Institutional Investors (FIIs): On April 2, FIIs were net sellers, offloading ₹5,901.63 crore worth of equities, contributing to market uncertainty.

• Rupee Outlook: Analysts predict that the rupee could find strong support around 85.50-85.60, but if selling pressure continues, it might weaken further towards 86.00-86.20 levels.

India’s Forex Reserves Rise Despite Rupee Depreciation

Amid rupee depreciation, India’s forex reserves increased by $4.529 billion to $658.8 billion for the week ending March 21. This marks the third consecutive week of reserve growth, indicating that the RBI has been intervening in the forex market to reduce volatility.

In the previous week, the reserves had risen by $305 million, signaling that India is maintaining a strong buffer against external risks.

What’s Next for the Rupee?

Several factors will determine the rupee’s performance in the coming weeks:

1. US Tariff Announcements – Any major tariffs imposed on Indian exports could trigger further depreciation.

2. Crude Oil Price Trends – If crude oil prices remain high, India’s import costs will exert more pressure on the currency.

3. Foreign Investment Activity – If FIIs continue to sell Indian assets, the rupee may weaken further.

4. RBI Interventions – The Reserve Bank of India is expected to step in if rupee volatility increases significantly.

Conclusion: A Volatile Start for the Rupee

The rupee’s 23 paise drop to 85.73 against the US dollar on April 2 highlights the market’s cautious sentiment amid global economic concerns. With rising crude prices and uncertainty over reciprocal tariffs, traders and investors will closely monitor upcoming developments.

Market analysts suggest that the rupee could stabilize around 85.50 levels, but if external pressures persist, it might test 86.00-86.20 in the near term. Investors are advised to stay alert to geopolitical and economic factors impacting forex markets.

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