Euro-fuelled dollar surge adds to headwinds facing rupee
The Indian rupee is likely to open weaker on Tuesday, weighed down by a jump in the dollar index following a steep decline in the euro, as investors digested the implications of the recent US-EU trade deal.
An uptick in oil prices, coupled with persistent foreign portfolio outflows, also poses challenges for the rupee, which has already declined about 1% so far this month.
The 1-month non-deliverable forward indicated the rupee will open in the 86.75-86.77 range versus the U.S. dollar, compared with 86.6650 in the previous session.
The dollar index rose 1% on Monday, while the euro slumped, as investors sobered up to the terms of the trade deal between the European Union and the United States.
"Once markets absorbed the details, sentiment flipped from the reality that tariffs would still increase to 15% with the Trump administration still maintaining tariffs as a leverage tool," analysts at DBS said in a note.
Asian currencies were mostly nursing modest declines on the day and regional equities were largely weaker.
India's benchmark equity index, the Nifty 50, was poised to open little changed but expected to face pressure on diminished hopes of an interim trade deal with the United States, sustained foreign outflows and tepid quarterly earnings.
Foreign investors net sold nearly $700 million worth of Indian stocks on Monday, according to provisional exchange data.
Traders reckon that the rupee is biased to trend lower in the near term, with support expected around the 86.80 and 87 levels.
Whether the Reserve Bank of India steps in firmly to cap rupee deprecation around the 87 mark would also be key to watch, a trader at a foreign bank said.
Meanwhile, crude oil prices rose to touch a 10-day high and were last hovering around $70 per barrel after U.S. President Donald Trump said he was reducing the 50-day deadline he gave Russia over its war in Ukraine to 10-12 days.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 86.90; onshore one-month forward premium at 13.75 paise
** Dollar index at 98.6
** Brent crude futures at $70.1 per barrel
** Ten-year U.S. note yield at 4.4%
** As per NSDL data, foreign investors sold a net $164mln worth of Indian shares on Jul. 25
** NSDL data shows foreign investors sold a net $19.2mln worth of Indian bonds on Jul. 25
