INR: Trade risks and capital flows shape outlook – Commerzbank

Commerzbank analysts Charlie Lay and Moses Lim highlight that the US Supreme Court’s IEEPA ruling and a new US–India trade deal lower average US tariffs on Indian exports but keep trade uncertainty elevated. They warn that higher Oil prices and continued capital outflows could pressure the Rupee.

Tariff shifts and flows weigh on Rupee

"The US Supreme Court's ruling on IEEPA tariffs overshadowed the recently struck trade deal with the US. The average tariff rate for Indian exports to the US should drop but trade uncertainties are likely to linger."

"Following the announcement of the US trade deal, USD-INR has dropped back from the record high to the 90-91 range. Higher oil prices and continued capital outflows could exert downside pressure on INR in the near term."

"Net foreign capital outflows continue to weigh on INR. However, there has been some reprieve of late. We look for consolidation in USD-INR near term, between the 89-91 range."

"In early February, President Trump agreed to cut the reciprocal tariff on India to 18% from 25% and to remove the punitive 25% tariff imposed due to India's purchases of Russian oil. However, this rate is above the announced new US global tariff rate of 15%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)