The Indian Rupee fell to a record low against the offshore Chinese Yuan on Friday, potentially giving some Indian exporters, who face high US tariffs, a competitive edge.

The Rupee slid to 12.3862 per offshore Yuan, marking a 1.2% decline for the week and a 1.6% drop for the month.

Over the last four months, the currency has depreciated by nearly 6% against the Yuan.

According to Gaura Sen Gupta, an economist at IDFC FIRST Bank, the Rupee’s decline against the Yuan reflects recent contrasting developments regarding US tariffs on India and China, Reuters news agency reports.

This week, Washington added a 25% tariff on Indian goods, raising the total US duties on the country’s exports to 50%.

Meanwhile, Chinese exports are subject to a lower 30% US tariff, with the threat of higher triple-digit duties temporarily on hold.

The Yuan-Rupee exchange rate is significant for India’s trade performance, as both countries compete directly in major US export sectors, including textiles, engineering goods, and chemicals.

A weaker Rupee against the Yuan makes Indian goods more competitively priced compared with Chinese products in export markets, partially offsetting the impact of higher US tariffs.

In addition, it could help reduce India’s trade deficit with China.

The Yuan-Rupee exchange rate is one of the key indicators monitored by the Reserve Bank of India, according to a source familiar with the central bank’s approach, who requested anonymity as they were not authorised to speak to the media.

Dhiraj Nim, an FX strategist at ANZ Bank, said the RBI is likely to view the Rupee’s decline against the Yuan positively, since it does not represent a weakening “beyond their comfort” level against the greenback.

“The RBI should anyway be welcoming a weaker rupee per se... that it is relative to the yuan, all the better,” he said.

The Rupee dropped past the 88-per-Dollar level, reaching a record low of 88.29. Bankers indicated that the RBI likely intervened to stabilise the currency.