MUMBAI: The Indian rupee looks set to stay under pressure on Tuesday, with looming U.S. tariff hikes casting a shadow over sentiment.
The dollar’s decline after President Donald Trump’s latest attack on the Federal Reserve will offer little reprieve for the currency, traders said.
The 1-month non-deliverable forward indicated the rupee will open in the 87.64 to 87.68 range versus the U.S. dollar, compared with 87.58 in the previous session.
Indian goods face U.S. tariffs of up to 50% with effect from Wednesday – among the highest levied on any U.S. trading partner.
Washington has already imposed 25% duties on shipments from India. Trump had in the first week of August said U.S. will impose additional 25% tariff on Indian goods from August 27, citing New Delhi’s continued imports of Russian oil.
The U.S. Department of Homeland Security published a notice of implementation of additional tariffs, that are set to take effect from August 27.
“The notice underscores that the tariffs are set to kick in as planned,” said a Mumbai-based FX trader at a bank.
“USD/INR is struggling to find a bottom — tariff overhang is crowding out whatever relief may be there. Importers have been buying dips and will continue to chase it higher. I suspect vols (volatility) will be bid too,” the trader said.
Dollar drops
The dollar index dropped after Trump said he was removing Federal Reserve Governor Lisa Cook from her position for allegedly committing mortgage fraud. Longer maturity U.S. yields rose.
Trump’s unprecedented move further undermines confidence in the Fed’s independence and U.S. assets, analysts said.
The removal of Cook comes after the president has regularly threatened to fire Fed Chair Jerome Powell.
American Dollar Exchange Rate