Rupee to decline on risk aversion spurred by US tariffs, spot date shift
The Indian rupee is set to fall at open on Thursday, pegged back by risk aversion fuelled by the U.S. auto tariffs and the shift in the spot date to the next fiscal year beginning April 1.
The 1-month non-deliverable forward indicated that the rupee will open at 85.80-85.88 to the U.S. dollar compared with 85.7050 in the previous session.
Asian shares dropped, and U.S. equity futures extended losses after U.S. President Donald Trump announced new tariffs on all auto imports, intensifying the ongoing trade conflict. U.S. equities had already experienced a sell-off before Trump's announcement.
The dollar index reached a three-week high on Wednesday before partially retracing.
The rupee's anticipated weakening due to the shift in the spot shift has been amplified by the souring of the risk appetite, a currency trader at a Mumbai-based bank said.
With India's money markets shut on March 31 and April 1 for a local holiday, Thursday's spot trades will be settled on April 2. Wednesday's spot date was March 28.
The rupee at open will have to adjust for the carry cost - around 10/12 paisa - between this fiscal's last day and the next fiscal's first day, opening on a weaker note.
Interbank traders who went short on the dollar/rupee on Wednesday for the carry trade will be looking to buy the pair at open.
FOCUS ON APRIL 2
Trump's comments on Wednesday suggesting the reciprocal tariffs set to be implemented on April 2 will be "lenient", would be a relief for the rupee and other emerging market currencies.
"Until clarity emerges on the magnitude and scope of tariffs and their implementation, risk appetite is likely to remain muted," ANZ Bank said in a note.
The tariff uncertainty has meant that a measure of U.S. consumer confidence plunged to its lowest level in more than four years in March, with households fearing a recession in the future and higher inflation.
KEY INDICATORS:
One-month non-deliverable rupee forward at 86.12; onshore one-month forward premium at 29.5 paisa ** Dollar index at 104.32 ** Brent crude futures up 0.2% at $73.9 per barrel
Ten-year U.S. note yield at 4.35%
As per NSDL data, foreign investors bought a net $664.7 million worth of Indian shares on March 25
NSDL data shows foreign investors sold a net $56 million worth of Indian bonds on March 25
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