The Indian rupee is set to open slightly weaker on Tuesday following U.S. President Donald Trump's imposition of tariffs on steel and aluminum imports, raising concerns about a potential trade war. The 1-month non-deliverable forward suggests the rupee will open at 87.52-87.54 to the U.S. dollar, down from 87.4750 on Monday. The currency had approached 88 on Monday before central bank intervention aided recovery.
A bank currency trader noted that the 88 level "probably marks the near-term top for now" for the dollar/rupee pair, considering the Reserve Bank of India's actions. A "bigger" dip from this level seems unlikely given Trump's tariff stance, the trader added.
Trump's tariff implementation on Monday heightened fears of a broad trade conflict. He indicated plans for reciprocal tariffs on all countries within two days. U.S. equity futures, along with most Asian shares, saw declines, while the dollar index rose slightly. Asian currencies also dropped.
The currency trader remarked that the losses in Asia's forex and equities were "not really alarming" and suggested that investors "have accepted it without much noise." Trump's actions suggest that previous optimism about avoiding a trade war, following the pause on tariffs for Canada and Mexico, may have been misplaced.
Attention will also be on Federal Reserve Chair Jerome Powell's testimony before the Senate Banking Committee. MUFG Bank noted that Powell "is unlikely to deviate from the current neutral tone collectively from the FOMC (Federal Open Market Committee)."
Source: Reuters