US tariff jitters sink dollar, paving way for rupee to extend rally
The Indian rupee is expected to extend its rally on Friday, supported by a broad-based slump in the U.S. dollar on concerns that the sweeping U.S. tariffs will hinder economic growth.
The one-month non-deliverable forward indicated that the rupee will open at 85.28-85.30 per dollar compared with its close of 85.43 in the previous session.
The currency, boosted by the dollar's weakness and position unwinding, is trading near its yearly high. It started Thursday on a weak note due to risk aversion before staging a recovery.
If the rupee "held up on a day like yesterday, you have to wonder what will trouble it," a currency trader at a bank said.
"I keep thinking that there is no more downside (on the dollar/rupee pair) and yet it keeps falling."
The dollar index plummeted nearly 2% on Thursday, logging in its worst day in more than two years, amid worries that President Donald Trump's more severe-than-expected tariffs would lead to higher inflation and hurt growth.
Trump said he would impose a 10% baseline tariff on all U.S. imports and higher duties on India and several other countries.
The blowback on the U.S. economy "leaves the dollar naked" and investors fearing the impact on confidence and activity, ING Bank said in a note.
The concerns over U.S. growth have prompted investors to lift their expectations to four rate cuts by the Federal Reserve this year, starting in June. The 2-year U.S. yield is at its lowest in six months.
Asian currencies were up on the day, with the Korean won leading the way. Equities, meanwhile, added to Thursday's decline.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 85.52; onshore one-month forward premium at 22 paisa
** Dollar index down at 101.82
** Brent crude futures down 0.5% at $69.8 per barrel; dropped over 6% on Thursday
** 10-year U.S. note yield at 4%; declined 10 bps on Thursday
** As per NSDL data, foreign investors sold a net $123.9 million worth of Indian shares on April 2
** NSDL data shows foreign investors sold a net $21.7 million worth of Indian bonds on April 2
