Rupee to rise at open after dollar reverses tariff ruling-spurred rally
The Indian rupee is poised to open higher on Friday, after the U.S. dollar’s rally, which was sparked by a U.S. court ruling on tariff policy, proved short-lived.
The 1-month non-deliverable forward indicated a open in the 85.36-85.40 range, versus the previous session's close of 85.5075.
So far this week, the Indian currency has been in a 84.78 to 85.70 range and is on track for a marginal weekly decline.
The rupee "is in a space where you have to play the ranges" with the near-term range defined by recent price action between 85.00 and 85.80, a currency trader at a Mumbai-based bank said.
"Moves below 85 (on dollar/rupee) and past 86 are difficult to imagine at this stage."
DOLLAR RESUMES DECLINE
The dollar index, which had touched an intraday high of 100.48 on Thursday, slipped to 99.30, allowing Asian currencies to recover from losses.
The dollar had initially found support after a U.S. court ruling blocked most of former President Donald Trump’s proposed tariffs.
However, a federal appeals court later issued a temporary pause on the ruling, allowing the tariffs to remain in place for now. Senior officials from the Trump administration had anyway downplayed the impact of the ruling blocking the tariffs, expressing confidence it would be overturned on appeal and indicating that alternative legal avenues to impose tariffs remain available.
While the initial court ruling sparked optimism, it does not eliminate the uncertainty surrounding the U.S. trade policy, ANZ Bank said in a note.
"The appeal process could drag on for months, adding to trade policy uncertainty,” ANZ noted, while pointing out that legal experts have suggested that the administration does indeed have other legal authorities to levy tariffs.
The dollar was further pressured by data that showed the number of Americans filing new applications for jobless benefits rose more than expected last week.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 85.5; onshore one-month forward premium at 13.25 paise
** Dollar index at 99.30 ** Brent crude futures down 0.4% at $63.9 per barrel ** Ten-year U.S. note yield at 4.42% ** As per NSDL data, foreign investors bought a net $542.6 million worth of Indian shares on May. 28
** NSDL data shows foreign investors sold a net $41.3 million worth of Indian bonds on May. 29
