Rupee to cling to recovery before long weekend featuring Trump-Putin meet
The Indian rupee is expected to open largely unchanged on Thursday, holding on to the last session's unexpected recovery, with traders awaiting the outcome of a key meeting between U.S. President Donald Trump and Russian President Vladimir Putin.
The 1-month non-deliverable forward indicated the rupee will open in the 87.44-87.46 range versus the U.S. dollar, flat from Wednesday's level of 87.44. The local currency had its best day in more than a month on Wednesday, thanks to a softer dollar and position adjustments.
"The recovery yesterday was against the trend and caught a few by surprise," a senior banker at a private bank said.
"Today should be quiet with a mild upside bias (on dollar/rupee)," he added. "Most interbank desks are in wait-and-watch mode with positions light heading into a potentially risk-filled weekend."
Indian financial markets are shut on Friday, when Trump and Putin are scheduled to meet in Alaska to negotiate an end to the war in Ukraine.
For India, the meeting holds added significance after Trump criticised its purchase of Russian oil and imposed an extra 25% tariff on its goods effective August 27, doubling the rate to 50% - the highest U.S. tariff on a country alongside Brazil.
"At a 50% tariff rate, several Indian industries would face significant headwinds, particularly those for which the U.S. is their largest export market," said Lim Ze Hao, an analyst at CreditSights.
On Wednesday, Trump threatened "severe consequences" if Putin did not agree to peace in Ukraine, while adding that a second meeting, possibly involving the Ukrainian president, could follow swiftly.
A conciliatory outcome could help calm jitters and support the rupee, while a combative outcome may renew pressure on the currency by triggering equity flows and heightening concerns over U.S. trade policy towards India.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 87.58; onshore one-month forward premium at 11 paise
** Dollar index at 97.72
** Brent crude futures up 0.5% at $65.9 per barrel
** Ten-year U.S. note yield at 4.23%
** As per NSDL data, foreign investors sold a net $302.1 million worth of Indian shares on August 12
** NSDL data shows foreign investors sold a net $76.5 million worth of Indian bonds on August 12
