MUMBAI: The Indian rupee is likely to decline at open on Tuesday in the wake of renewed worries over U.S. tariffs, which helped the dollar claw back losses.
The 1-month non-deliverable forward indicated that the rupee will open at 86.75-86.78 to the U.S. dollar compared with 86.6950 in the previous session.
The Indian currency “has broadly resolved” itself into a 86.50 to 87 range for the time being, a currency trader at bank said.
The hurdle for it to move past 86.50 “is a lot higher” than for it to slip past 87, he said.
The realized volatility on the rupee has cooled off largely in part due to the Reserve Bank of India’s heavy intervention near the 88 level. The 1-month realized volatility is now at 3.3%, having hit more than 4% two weeks back.
The dollar index, having climbed to an over 2-month low of 106.35 on Monday, recovered to 106.70. Asian currencies dipped and risk appetite soured amid the return of worries over U.S. tariffs.
Indian rupee slips on weak equities
U.S. President Donald Trump on Monday said that tariffs on Canadian and Mexican imports are “going forward on time and on schedule” in reply to a question whether Canada and Mexico had done enough to avoid the 25% U.S. duties.
The U.S. president had previously agreed to a 30-day pause on the tariffs.
Meanwhile, there was more disappointing U.S. data with regional manufacturing faltering amid uncertainty on tariffs. This follows the weak reading on a U.S. business activity index.
“While markets wait with bated breath on the exact shape and magnitude of tariffs, the broader macro backdrop seems to suggest that U.S. economic activity is slowing down and more importantly disappointing market’s expectations,” MUFG Bank said in a note.
American Dollar Exchange Rate