The Indian rupee fell to a record low on Monday amid fears of a global  trade war as US President Donald Trump slapped tariffs on imports from Canada, Mexico and China .

The rupee crossed 87 per US dollar for the first time even as Trump’s action rattled global financial markets.

The rupee slumped to 87.28 per US dollar before closing at 87.1850, down by nearly 0.7%. This is the Indian currency’s biggest single-day percentage loss since 13 January.

Incidentally, the rupee has fallen almost 4% since October 2024.

Asian currencies also slumped after the dollar rallied on Trump's sweeping tariffs that impose a 25% levy on Mexican and Canadian imports into the US, while those from China will attract a 10% charge, Reuters reported. The tariffs kick in on Tuesday.

Asian and European stocks also fell on Monday, while US equity futures pointed sharply lower. While intermittent dollar sales from state-run banks helped limit the rupee's decline, the absence of stern intervention by the Reserve Bank of India was seen by many traders as an affirmation that it is allowing the rupee to move in line with its peers, Reuters reported.

The Reserve Bank of India "will allow some more adjustment in alignment with peers,"  told the Reuters' Trading India forum 

The heavy intervention seen in last 1-2 years is unlikely to be repeated, Reuters quoted Shubhada Rao, founder of QuantEco Research, as saying.

Amid persistent headwinds and expectations of the central bank easing its grip, the rupee's 1-month implied volatility has averaged about 3.5% so far in 2025, up from the average of 2% last year.