Rupee slips 24 paise to 87.15 against US dollar in early trade

Mumbai: The rupee slipped below the 87 per dollar level against the US dollar in early trade on Wednesday as rising crude oil prices and uncertainty over the India-US trade agreement kept investor sentiments muted.

Forex traders said month-end dollar demand from importers and sustained foreign fund outflows weighed on the local unit.

At the interbank foreign exchange market, the rupee opened on a negative note and touched an early low of 87.15 against the American currency, registering a fall of 24 paise over its previous close.

On Tuesday, the rupee declined to an over four-month low level and closed 21 paise weaker at 86.91 against the US dollar.

Brent oil prices rose 0.11 per cent to USD 72.59 per barrel, as potential supply shortages came into focus after US President Donald Trump again reiterated that he would start imposing measures on Russia, including a 100 per cent tariff on its secondary oil buyers if Russia did not end the war in 10-12 days.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.11 per cent to 98.77.

"Trump said that India faces tariffs to the extent of 20-25 per cent, which is much more than India and markets were anticipating, thus taking the rupee beyond 87 levels after a weak close at 86.81 on Tuesday," said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.

US President Donald Trump has said the trade deal with India is not finalised, as he stressed that India imposes more tariffs than almost any other country. Asked if the deal with India has been finalised, he said, “No, it’s not,”.

He was also asked about reports that India is preparing to face higher US tariffs between 20-25 per cent, to which he replied, "I think so." Meanwhile, in the domestic equity market, Sensex advanced 126.27 points or 0.16 per cent to 81,464.22, while Nifty rose 45.90 points or 0.18 per cent to 24,867.00.

Foreign institutional investors (FIIs) offloaded equities worth Rs 4,636.60 crore on a net basis on Tuesday, according to exchange data.

A US team will visit India on August 25 for the next round of negotiations for the proposed bilateral trade agreement between the two countries.

Though the team is coming at the end of next month, both sides remain engaged to iron out differences for an interim trade deal before August 1, which marks the end of the suspension period of tariffs imposed by US President Donald Trump on dozens of countries, including India (26 per cent).

The prospects for an interim deal may look dim as US Trade Representative Jamieson Greer has said that more negotiations will be needed with India on a trade pact. However, officials are not ruling out the possibility of a last-minute breakthrough.

Indian exporters may face an additional duty of 16 per cent - on top of the existing 10 per cent, if the August 1 deadline is not extended further or an interim deal is not reached between the two countries.