MUMBAI: The ongoing US-India tariff-related issues took its toll on the rupee on Monday, sending it to a record low level of 88.33 per dollar. In the bullion market, the increasing chances of a cut in interest rates in the US revived the rally in precious metals globally. Combined with the weakness of the rupee, gold and silver prices both were at new life-high levels in the domestic market during the day.On Monday, the rupee slipped to 88.33 to a dollar intraday but recovered to close at 88.2, unchanged from its previous close. The currency ended Aug with a 0.7% decline, marking its fourth consecutive monthly fall.
Year-to-date, the rupee has weakened around 3%, making it the worst-performing Asian currency. The slide has been driven by concerns over higher US tariffs on Indian goods, which threaten to erode export competitiveness and weigh on growth. The continuous selling by foreign investors, who have net sold stocks worth nearly Rs 40,000 crore since Aug 1, have also been weighing on the rupee’s strength against peers.Some traders believe that the central bank has let the rupee slide given the pressures on the trade front due to tariffs. Importers are also staying away as there is uncertainty on the trade front as well.Economists warn that persistent outflows and weaker exports could hurt corporate earnings, the trade balance, and the broader growth outlook. In the bullion market, gold and silver were on streak, following global market rallies.On Monday, on MCX, the gold futures for Oct delivery – the most-traded contracts – almost hit Rs 1.06 lakh/10gm mark, a new all-time high. On the same exchange, silver futures for Dec delivery, the most traded contracts, were almost within striking distance of Rs 1.25 lakh/kg level. In the international market, gold was trading at around $3,500/ounce, a new all-time high. And silver was trading above the $41.5/Oz mark, a level not seen in more than 14 years.According to analysts, in addition to expectations of a rate cut in the US, globally investors are also worried about the US central bank losing its autonomy, leading to weakness of the greenback. “Demand for safe havens has increased as a result of Trump’s historic attempt to oust a Fed governor, which has sparked worries about the loss of central bank’s authority,” said Renisha Chainani of Augmont, a bullion trading & research firm.A weak dollar leads to fall in prices of gold and silver (since both are dollar-denominated) in terms of other major currencies. This in turn could lead to higher demand for gold and silver.
