MUMBAI: The Indian rupee is likely to stay under pressure on Tuesday, as concerns over a potential tariff-driven U.S. recession sapped risk appetite across financial markets, driving most Asian currencies lower.
The one-month non-deliverable forward indicated that the rupee will open weaker at 87.40 to the U.S. dollar, compared with 87.33 in the previous session.
The local currency weakened 0.5% in the previous session, pressured by the maturity of positions in the non-deliverable forwards market.
Two traders pointed that these maturities are spread throughout the week, which could keep the rupee on the defensive.
Weaker dollar unlikely to help Indian rupee amid tariff worries, importer hedging
Meanwhile, U.S. equities sold off sharply on Monday, with the S&P 500 down 2.7% and the Nasdaq Composite slumping 4%, marking its worst day since September 2022.
In Asia, Japan’s Nikkei fell about 2%, while the blue-chip Chinese equity index was also trading in the red.
The downside risks to global growth from tariffs have been a concern for investors in recent sessions, particularly in light of a series of weak U.S. economic data signalling a slowdown in the world’s largest economy.
“Our best sense right now is that markets are still underpricing the downside risks to Asia’s growth and so it makes sense to position for Asian currency weakness at least in the near-term,” MUFG Bank said in a note.
Concerns about a global slowdown could further intensify pressure on the rupee, which is already one of Asia’s worst-performing currencies this year, with ongoing portfolio outflows also weighing on the local unit.
Foreign investors have net pulled out more than $3 billion from Indian stocks in March, driving the year-to-date tally to over $16 billion.
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