MUMBAI: The Indian rupee rose on Friday, tracking a Chinese yuan-driven rally in Asian peers, after US President Donald Trump said a trade deal with the country was on the cards, while volatility expectations plunged on relief over the lack of immediate US tariffs on China.
The rupee was at 86.31 to the US dollar at 10.20 a.m IST, up from 86.4575 on Thursday.
The local currency is poised for a weekly advance, a rare occurrence in recent months.
Trump said on Thursday that his recent conversation with Chinese President Xi Jinping was “friendly”, adding he thought he could reach a trade deal with China, which boosted the yuan and its Asian peers.
The yuan rose 0.5% to nearly 7.25 to the US dollar. Earlier this week, Trump had threatened to impose a 10% tariff on Chinese-made goods arriving in the US from Feb. 1.
The President had also threatened tariffs on Mexico, Canada and the European Union.
“There have been lot of comments that Trump plans to do this and that. However, there has been no concrete action, which is a relief (for Asia),” a currency trader at a bank said.
“You have to remember that the fear was that Trump on day 1 of his taking office would press on with tariffs.”
Relief for Indian rupee expected to be short-lived amid weak Asian peers
Volatility expectations in the rupee and other Asian currencies have dropped this week amid a pullback in tariff concerns.
The dollar/rupee 1-month implied volatility has declined to 3.3% from more than 4% last week.
For the offshore yuan, it has dropped to 4.5% from over 6%.
American Dollar Exchange Rate