The Indian rupee’s mild recovery, fueled by news of U.S.-India trade talks, is likely to face resistance at open on Tuesday. This comes amid the dollar’s rally and hedging interest from importers. The currency’s recent gains are being tested by broader market forces.
The 1-month non-deliverable forward indicated the rupee will open in the 88.66-88.68 range versus the U.S. dollar. This is little changed from 88.67 on Monday. Traders are watching these levels closely for any shifts.
The rupee, bolstered by support from the Reserve Bank of India to stay above the 89 mark, briefly strengthened past 88.60 on Monday. This occurred after news broke of an Indian trade delegation’s visit to the U.S. The central bank’s efforts have provided a cushion.
A trader at a private sector bank commented on the situation. He said, “There’s been plenty of noise around the U.S.-India trade deal. Unless there’s something concrete on the table, it doesn’t move the needle much.” This highlights the market’s cautious stance.
The market is looking for “real deliverables now” to provide proper support to the currency. Persistent hedging from importers adds pressure. The trader emphasized that tangible outcomes are needed for sustained recovery.
He noted that things have turned a shade better for the rupee lately. This is largely due to the RBI’s dogged defence and a flicker of positive momentum in equity flows. Foreign investors have shown renewed interest.
Foreign investors bought Indian shares for four sessions in a row through last Friday. This marks a turnaround from the consistent outflows seen before. Monday’s data will be available later in the day, offering more insights.
A shift in tone from U.S. President Donald Trump toward China lifted the dollar on Monday. This tempered trade concerns, while political uncertainty in Europe and Japan kept the euro and yen under pressure. Global factors are influencing the rupee’s path.
After announcing 100% tariffs on China on Friday, Trump struck a calmer note on Sunday. On Monday, U.S. Treasury Secretary Scott Bessent expressed confidence that the standoff could be “de-escalated”. These developments are key for currency markets.
The U.S. dollar has recovered, with markets viewing Trump’s latest tariff threat as a tactical move. It aims to strengthen his hand ahead of his planned meeting with Chinese President Xi Jinping later this month, MUFG Bank said in a note. This strategic play affects the rupee.
Key indicators show the one-month non-deliverable rupee forward at 88.78. The onshore one-month forward premium stands at 13.5 paise. These figures help gauge near-term expectations.
Per NSDL data, foreign investors bought a net $309.3 million worth of Indian shares on October 10. This inflow supports the rupee’s stability amid external pressures. It reflects improving investor sentiment.
NSDL data also shows foreign investors bought a net $8.9 million worth of Indian bonds on October 10. Such investments contribute to the currency’s resilience. They highlight a gradual shift in capital flows.
The rupee’s recovery remains modest as it navigates these complex dynamics. Trade talks and dollar strength will continue to shape its trajectory. Market participants await clearer signals.
Overall, the interplay between domestic support and global headwinds defines the rupee’s current stance. Each development adds a layer to its story, keeping traders on alert for the next move.