Rupee to draw support from Donald Trump`s trade optimism, curbed by firm dollar
The Indian rupee is likely to open slightly higher on Tuesday, with upbeat comments from U.S. President Donald Trump on a potential trade deal lending support, though a mostly firm dollar and hedging demand are expected to hinder.
The 1-month non-deliverable forward indicated the rupee will open in the 88.64 to 88.66 range versus the U.S. dollar, after closing at 88.6975 on Monday.
Trump said the U.S. is near to reaching a deal with India that would deepen economic and security ties between the two countries, adding that Washington will lower tariffs on Indian goods “at some point.”
The rupee’s muted reaction to Trump’s comments, according to a currency trader, stems from repeated instances of similar upbeat remarks and reports of an imminent deal.
"It is probably that the market is numb to such headlines,” he said, adding that the currency will likely respond only once a deal takes shape.
The prolonged absence of a trade agreement between India and the U.S. has weighed on sentiment toward the rupee, with bankers citing it as one of the key factors behind the currency’s underperformance this year.
Another currency trader said recent price action shows that dips in the dollar/rupee pair have been short-lived due to consistent hedging demand, which may explain the subdued reaction. The trader addiitonaly pointed to weakness in other Asian currencies.
The dollar index inched up while Asian currencies dropped with traders watching whether U.S. lawmakers can reach a deal to resolve the federal shutdown.
The U.S. Senate on Monday approved a compromise that would halt the longest shutdown in U.S. history. It next heads to the Republican-controlled House of Representatives, where Speaker Mike Johnson has said he would like to pass it as soon as Wednesday.
U.S. equities rallied on Monday and Treasury yields rose.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 88.78; onshore one-month forward premium at 12.75 paise
** Dollar index up at 99.66
** Brent crude futures down 0.2% at $63.9 per barrel
** Ten-year U.S. note yield rose to 4.12% on Monday
** As per NSDL data, foreign investors bought a net $872.4 million worth of Indian shares on Nov 7
** NSDL data shows foreign investors sold a net $13.1 million worth of Indian bonds on Nov 7
