Asia FX slump on trade war fears puts rupee on verge of 87/USD
The Indian rupee is poised to open at an all-time low against the dollar on Monday, tracking a slump in Asian currencies and risk aversion on worries over a trade war between the U.S. and its trading partners.
On the interbank order matching system, the rupee was quoting at 86.92-86.94 to the U.S. dollar, down from 86.6050 on Friday and past the 86.6475 lifetime low hit in mid January.
The Korean won, the Malaysian ringgit, the Indonesian rupiah and the Thai baht were all down about 1%, each, and the offshore Chinese yuan declined past 7.36.
To take rupee past the 86.60-86.65 zone, "big news was needed and we now have it", a currency trader at a bank said.
"The 87 figure does look in sight. However, in most likelihood, the Reserve Bank of India will at least put up a fight."
U.S. President Donald Trump slapped tariffs on Canada, Mexico and China, raising fears of a trade war that will hold implications for world growth and inflation.
In response, Canadian Prime Minister Justin Trudeau said his country would impose 25% tariffs on $155 billion of U.S. goods, while Mexican President Claudia Sheinbaum said she was instructing her economy minister to implement retaliatory tariffs without providing details.
The Canadian dollar and the Mexican peso dropped to multi-year lows. The dollar index rallied, approaching the 110 mark, while the S&P 500 Index futures slipped 2%.
The net impact to markets, including in Asia, from tariffs will depend on factors such as how long these tariffs are sustained for, MUFG Bank said in a note.
"The path of least resistance for now is for Asian currencies and risk assets to weaken, together with a higher risk premia to account for future meaningful tariff moves beyond what we have seen."
KEY INDICATORS:
** One-month non-deliverable rupee forward at 87.12; onshore one-month forward premium at 18 paise
** Dollar index climbs to 109.80
** Brent crude futures up 0.5% at $76 per barrel
** Ten-year U.S. note yield dips to at 4.51%
** As per NSDL data, foreign investors sold a net $202.6mln worth of Indian shares on Jan. 30
** NSDL data shows foreign investors bought a net $16.2mln worth of Indian bonds on Jan. 30
