Yuan recovery in lead-up to Donald Trump`s inauguration to help rupee
The Indian rupee is likely to kick off a pivotal week on a slightly positive note, assisted by the recovery of the Chinese yuan in the lead-up to Donald Trump's inauguration.
The 1-month non-deliverable forward indicated that the rupee will open at 86.50-86.52 to the U.S. dollar on Monday, compared with its close of 86.61 in the previous session.
Hopes of U.S.-China negotiations lifted the offshore yuan by 0.2% to 7.3220 per dollar, after the currency slipped past 7.36 last week.
The yuan will likely be the main driver of the rupee and other Asian currencies ahead of Trump's inauguration as U.S. President later in the day.
Trump told advisers he wants to travel to China after he takes office, the Wall Street Journal reported. The hope that Trump would extend TikTok's ban deadline provided a further boost.
Trump has indicated that one of his priorities would be to impose additional tariffs on China, which, in turn, would prompt the yuan to depreciate.
How quickly Trump moves on tariffs and their size will dictate the direction of the yuan and other Asian currencies.
"This week will be very headline driven and at the centre of it all will be Trump," a currency trader at a bank said.
The rupee "should move in line" with the yuan, although a rally will have less of an impact than a decline, he added.
The rupee has been under incessant strain due to equity outflows, higher U.S. Treasury yields, uncertainty around Trump's policies and speculators piling on wagers against the Asian currency.
Unless "the worst-case scenario plays out regarding tariff rhetoric, (the rupee) might take a breather in the coming days", Srinivas Puni, managing director at QuantArt Market Solutions, said.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 86.75; onshore one-month forward premium at 22.50 paisa
** Dollar index dips to 109.18
** Brent crude futures down 0.1% at $80.7 per barrel; up 8.4% month-to-date
** Ten-year U.S. note yield at 4.62%
** As per NSDL data, foreign investors sold a net $502 mln worth of Indian shares on Jan. 16
** NSDL data shows foreign investors sold a net $97.2 mln worth of Indian bonds on Jan. 16
