Rupee's modest recovery on US trade talks to contend with dollar headwinds
The Indian rupee's mild recovery, fuelled by news of U.S.-India trade talks, is likely to face resistance at open on Tuesday amid the dollars rally and hedging interest from importers.
The 1-month non-deliverable forward indicated the rupee will open in the 88.66-88.68 range versus the U.S. dollar, little changed from 88.67 on Monday.
The rupee, bolstered by support from the Reserve Bank of India to stay above the 89 mark, briefly strengthened past 88.60 on Monday after news broke of an Indian trade delegation's visit to the U.S.
"There's been plenty of noise around the U.S.-India trade deal. Unless there's something concrete on the table, it doesn't move the needle much," a trader at a private sector bank said.
The market's looking for "real deliverables now" - that’s what will provide proper support to the currency amid persistent hedging from importers, he said.
He did note that things have turned a shade better for the rupee lately, largely due to the RBI's dogged defence of the and a flicker of positive momentum in equity flows.
Foreign investors bought Indian shares for four sessions in a row through last Friday - a turnaround from the consistent outflows seen before. Monday's data will be available later in the day.
DOLLAR CHEER FADING U.S.-CHINA TRADE WORRIES
A shift in tone from U.S. President Donald Trump toward China lifted the dollar on Monday, tempering trade concerns, while political uncertainty in Europe and Japan kept the euro and yen under pressure.
After announcing 100% tariffs on China on Friday, Trump struck a calmer note on Sunday. On Monday, U.S. Treasury Secretary Scott Bessent expressed confidence that the standoff could be "de-escalated".
The U.S. dollar has recovered, with markets viewing Trump's latest tariff threat a tactical move to strengthen his hand ahead of his planned meeting with Chinese President Xi Jinping later this month, MUFG Bank said in a note.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 88.78; onshore one-month forward premium at 13.5 paise
** Dollar index at 99.26
** Brent crude futures gains 0.3% to $63.5 per barrel
** Ten-year U.S. note yield at 4.06%
** Per NSDL data, foreign investors bought a net $309.3mln worth of Indian shares on October 10
** NSDL data shows foreign investors bought a net $8.9mln worth of Indian bonds on October 10
