Rupee recovery to fade on yuan weakness, Donald Trump worries
The Indian rupee, following last week's relief rally, is expected to decline on Monday, weighed by the dip in the Chinese yuan and persisting worries over U.S. President Donald Trump's trade policies.
The 1-month non-deliverable forward indicated that the rupee will open at near 86.30 to the U.S. dollar compared with Friday's close at 86.2050.
The Indian currency climbed 0.5% last week, its best weekly performance in nearly one-and-a-half years, on relief that Trump did not impose tariffs immediately on taking office.
Last week, Trump talked of imposing tariffs on China, the European Union, Mexico and Canada. That he did not impose tariffs was a relief for Asian currencies.
"With Trump, we just do not know what to expect. While last week brought no concrete news on the tariffs, it could very well be different this week," a currency trader at a bank said, referring to the incident with Colombia.
On Sunday, Trump said he would impose sweeping retaliatory measures on Colombia, including tariffs and sanctions, after the South American country turned away two U.S. military aircraft with migrants being deported.
The dollar index inched higher on Monday. The offshore Chinese yuan dropped to 7.2650 to the U.S. dollar.
FED MEETING
The rupee and Asian currencies will be eyeing the Federal Reserve policy decision, due Wednesday. While the U.S. central bank is not expected to make any changes to the policy rate, the focus will be on any comments by Fed Chair Jerome Powell on the likely impact Trump's policies will have on the interest rate path.
"Trump's low taxes, less regulation policies should be good news for growth, while immigration controls and trade tariffs provide upside risk for prices, suggesting we could have a long wait for the Fed's next cut," ING Bank said in a note.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 86.50; onshore one-month forward premium at 20.5 paise
** Dollar index up at 107.71
** Brent crude futures down 0.9% at $77.8 per barrel
** Ten-year U.S. note yield at 4.59%
** As per NSDL data, foreign investors sold a net $354.1mln worth of Indian shares on Jan. 23
** NSDL data shows foreign investors sold a net $34.8mln worth of Indian bonds on Jan. 23
