The Indian rupee is set to open higher on Tuesday amid swings in the US dollar, driven largely by news flow and headlines related to US President Donald Trump’s proposed tariffs.
The one-month non-deliverable futures contract indicates that the rupee will open at 86.36-86.38 to the dollar, compared to its close of 86.5675 in the previous session.
At one point in the Asian session, the dollar index fell to a two-week low of 107.86 amid news that the new Trump administration will not immediately impose trade tariffs.
Mr. Trump will issue a broad trade memo that does not impose new tariffs on his first day in office, an official in the new Trump administration said.
The dollar index recovered to 108.40 after Trump said he planned to impose tariffs on Canada and Mexico by February 1.
The 1-month non-deliverable USD/INR futures contract was at 86.62, after briefly falling below 86.40.
“This is how it’s going to be now that Trump is in charge… restless and volatile,” said a bank currency trader.
The rupee will largely do “what the yuan does” and what the Chinese currency does “will depend on what Trump does”, he said.
The offshore Chinese yuan, which hit 7.25 to the U.S. dollar at one point, was at 7.2850.
Trump’s tariff plan is a major concern for investors. The size and extent of the tariffs will determine whether the dollar’s recovery since Mr. Trump’s election victory is sustained.
-With tariffs likely to be inflationary, they should also dictate the outlook for how many rate cuts the Federal Reserve makes this year.
“Markets will have a lot to digest this week,” ANZ Bank said in a note.
KEY INDICATORS:
** One-month non-deliverable rupee forward exchange rate at 86.61; one month onshore forward premium at 25 paisa.
** Dollar Index up to 108.40
** Brent up 0.1% to 80.2 dollars per barrel
** Ten-year US bond yield at 4.54%.
** According to NSDL data, foreign investors sold $418.9 million worth of Indian stocks on January 17.
** According to NSDL data, foreign investors bought $61.7 million worth of Indian bonds on January 17.
