Rupee set to decline at open, Donald Trump keeps tariff headlines rolling
The Indian rupee is likely to open weaker on Monday after fresh tariff threats from U.S. President Donald Trump intensified concerns over trade tensions, sparking risk aversion and weighing on Asian currencies.
The 1-month non-deliverable forward indicated an open in the 85.90-85.94 range versus 85.80 on Friday. Most Asian currencies and shares dropped while U.S. equity futures extended Friday's losses.
The 86-86.10 level remains a "clearly" defined support for the rupee, a currency trader at a Mumbai-based bank said. While the risk of a breach is real, the currency has previously managed to avoid it even when a break seemed imminent, he said.
On Saturday, Trump capped a week of tariff-heavy rhetoric by announcing a 30% levy on most imports from the European Union and Mexico starting August 1.
The announcement followed a series of tariff moves, including a 35% tariff on Canadian imports, a proposed 15%–20% blanket levy on other partners, and a 50% tariff threat along with notices to seven smaller countries.
U.S. tariff threats have been "coming thick and fast" over the last few days, ANZ Bank said.
Amid the tariff headlines, the focus will be on the June U.S. consumer inflation data due on Tuesday.
If the data comes in weaker than expected with not much evidence of an impact of tariffs, it is possible the Federal Reserve will debate cutting rates at this month's meeting, ANZ Bank said.
The market impact of Trump's tariff threats appears to be diminishing, with the S&P 500 index shedding just 0.3% last week and the 10-year U.S. Treasury yield dipping about 7 basis points.
While the dollar index rallied near 1% last week, it came after a sustained drop in the first half of the year.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 86.01; onshore one-month forward premium at 10.25 paise
** Dollar index up at 97.96
** Brent crude futures up 0.1% at $70.4 per barrel
** Ten-year U.S. note yield at 4.41%
** Foreign investors bought a net $98.1 million worth of Indian shares on July 10, as per NSDL data
** NSDL data shows foreign investors bought a net $39.3 million worth of Indian bonds on July 10
