US tariff worries may push rupee to all-time low before India budget
The Indian rupee is expected to open weaker on Friday, possibly dipping to a lifetime low on U.S. President Donald Trump's tariff threat, while traders wait for the federal budget to be presented over the weekend.
The 1-month non-deliverable forward indicated that the rupee will open at 86.64-86.65 to the U.S. dollar compared with 86.6250 in the previous session and flirting with the record low of 86.6475 hit about two weeks back.
The rupee was forming a range "around 86.50 and thereabouts" and whether it can shake that range "is entirely dependent on how Trump tariff agenda plays out", said Srinivas Puni, managing director at QuantArt Market Solutions.
"The Indian budget in Feb is unlikely to disrupt this view."
Trump is planning to impose tariffs on Canada and Mexico on Saturday and is considering fresh tariffs on China. Trump said on Thursday he would soon decide whether to exclude Canadian and Mexican oil imports from the 25% tariffs that he has vowed to impose.
With both Mexico and Canada pledging to retaliate to any trade levies it would notably raise the risk of tit-for-tat tariffs and weigh on world growth and trade, MUFG Bank said in a note.
Asian currencies were down on Friday. The offshore Chinese yuan was at 7.29 to the U.S. dollar.
INDIA BUDGET
Finance Minister Nirmala Sitharaman will present the federal budget on Saturday, aiming to stimulate economic growth through measures such as income tax cuts.
India equity markets are open on Saturday, while the forex and money markets' reaction to the budget will be seen on Monday.
"U.S. tariffs and what happens to the dollar will be the main drivers (for the rupee)," a currency trader at a bank said.
Indian equities reaction, if it is "sizeable", may have a temporary impact on the rupee at Monday's open, the trader said.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 86.81; onshore one-month forward premium at 17 paise
** Dollar index up at 108.11
** Brent crude futures up 0.6% at $77.3 per barrel** Ten-year U.S. note yield at 4.53%
** As per NSDL data, foreign investors sold a net $207.5mln worth of Indian shares on Jan. 29
** NSDL data shows foreign investors bought a net $13.5mln worth of Indian bonds on Jan. 29
