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Informist, Tuesday, Feb. 4, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended higher against the dollar Tuesday as the dollar index eased after US President Donald Trump paused tariff measures on Mexico and Canada, dealers said. Dollar sales by some banks, likely on behalf of foreign portfolio investors, supported the local currency, they said. 

After moving in a range of 12 paise during the day, the rupee ended higher at 87.0675 a dollar against Monday's close of 87.1850. Most other Asian currencies also rose against the greenback. Other Asian currencies rose 0.1-0.7%, with the Malaysian ringgit being the best performer.

The rupee opened sharply up against the dollar at 87.0350 due to easing in the dollar index after Trump announced that he had delayed the 25% tariff imposition on Canada and Mexico by a month. The agreement comes after Ottawa and Mexico City agreed to the terms of Washington for tackling illegal immigration. "Canada has agreed to ensure we have a secure Northern Border, and to finally end the deadly scourge of drugs like Fentanyl that have been pouring into our country," Canadian Prime Minister Justin Trudeau posted on his social media handle X.

Mexican President Claudia Sheinbaum too agreed to send 10,000 troops to the US-Mexico frontier in return for delaying the tariff imposition. However, Washington's additional 10% tariff on Beijing came into effect Tuesday. 

The rupee came under pressure initially as banks purchased the greenback, on behalf of importers, who feared a further fall in the rupee, dealers said. However, they said importers were not in panic mode as the market was not as volatile as it was on Monday. "Importers are not in panic, whatever hedging activities they had to, they had done and booked profits," a dealer at a private bank said.

The rupee was dragged to the day's low of 87.1300 as the dollar index rose briefly on safe-haven demand after China announced a 15% tariff on coal and liquefied natural gas imports from the US and an additional 10% tariff on oil and agricultural equipment imports from the US. China also said it would probe the technology giant Google for alleged antitrust violations. All these measures announced by China on Tuesday raised investors' concerns over a possible trade war between the two countries.

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.50. The index had risen to a three-week high of 109.88 on Monday.

However, some banks sold the greenback on behalf of overseas investors to invest in Indian equity markets, which supported the rupee, dealers said. The Nifty 50 and the BSE Sensex ended up 1.6% and 1.8%, respectively, on Tuesday. 

Dealers said market participants are keenly waiting for the Reserve Bank of India's monetary policy decision due Friday, when the rate-setting panel is expected to lower the repo rate by 25 basis points. It may weigh on the Indian currency, dealers said. 

FORWARDS 

Premiums on the dollar/rupee forward contract fell across tenors Tuesday owing to a narrower liquidity deficit in the banking system, dealers said. On Monday, the net liquidity injected by the Reserve Bank of India--a proxy for systemic liquidity deficit--fell to INR 1.08 trillion from INR 1.59 trillion on Sunday. The net injected liquidity on Monday was the lowest since Jan. 6.

Apart from an ease in the liquidity deficit, some banks sold the greenback for forward delivery at higher levels, anticipating that forward premiums may not rise more, given the speculation about a rate cut by the RBI, dealers said. They said the interest rate differential between the US and India is likely to come down, should the central bank announce a 25-basis-point cut in the repo rate Friday.

The volatility in the forward market is likely to remain relatively high amid uncertain global developments, dealers said. Market participants were now "acting more on speculation than anything", with a divergent view of key future developments amongst traders driving volatility higher, dealers said.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 190.73 paise, against 199.70 paise Monday. On an annualised basis, the premium was 2.19% against Monday's close of 2.29%.

OUTLOOK 

On Wednesday, the rupee will take cues from movement in the dollar index and offshore Chinese yuan, dealers said. Market participants would also assess the US Jobs and Labor Turnover Survey for December, due later Tuesday.

"It's high time they (RBI) cut rates, so when they do it, the rupee will depreciate. To limit the pace and size of the fall, they will be keeping the currency range-bound. But next week can be volatile," a dealer at a private bank said.

"The RBI and MPC will shape the course of the dollar/rupee movement till next week," another dealer at a state-owned bank said. 

Dealers said they expect banks to purchase the greenback on behalf of importers, who are wary of a further fall in the rupee. However, they also expect the central bank to step in with dollar sales, to prevent the rupee from falling sharply and curb excessive market volatility.

During the day, the rupee is seen in a range of 87.00-87.50 a dollar, with strong technical resistance pegged at 86.90 a dollar.

India Rupee - World FX: Dlr index dn as US delays tariffs on Mexico, Canada

MUMBAI – The dollar index fell from a three-week high after US President Donald Trump paused tariff measures on Canada and Mexico, opening doors for negotiations, dealers said. The dollar index had strengthened to a three-week high of 109.88 on Monday after Trump had announced tariffs on Canada, Mexico, and China during the weekend. 

While the dollar index recovered slightly and moved up for a brief period on Tuesday when China announced retaliatory tariffs on the US, it quickly came down as market participants assessed chances of a trade deal between the two countries soon. In response to Trump's 10% additional tariff on China, which came into effect from Tuesday, Beijing retaliated with a 15% tariff on coal and liquefied natural gas imports from the US. It also imposed a 10% additional tariff on oil and agricultural equipment imports from the US. China said it would probe the tech giant Google for alleged antitrust violations. 

On Monday, US President Donald Trump agreed to delay the 25% tariff on Canada and Mexico after diplomatic talks, but proceeded with the additional 10% tariff on China. 

At 1521 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.48. The index had risen to a three-week high of 109.88 on Monday. The euro was steady against the US currency. Market participants were keenly waiting for the release of the US Job Openings and Labour Turnover Survey, scheduled to be released Tuesday.

The Japanese yen was down 0.4% against the greenback. However, losses in the currency were limited as the Bank of Japan Governor Kazuo Ueda said on Tuesday that the central bank aims to achieve the 2% inflation target sustainably, reinforcing the possibility of a near-term interest rate hike.

The Australian dollar and the New Zealand dollar were each down 0.4% against the US currency on fears of a potential US-China trade war. Any change in the Chinese economy has an impact on the economies of Australia and New Zealand due to their close bilateral trade relations.

The Canadian dollar was steady against the US dollar on Tuesday.  (Gowri Lakshmi)

India Rupee:Erases some gains as dlr index up on China's retaliatory tariffs

MUMBAI - The rupee erased some gains from early trade as the dollar index moved higher after China announced retaliatory tariff measures against the US. The dollar index, which had eased on Monday, rose to a high of 109.04 on Tuesday on safe haven flows as investors assessed possible trade war implications from two of the largest economies in the world. 

"The apprehension of a global trade war is what is driving the dollar/rupee pair. Early in the morning, the (Indian) currency was on the rise as this apprehension had cooled down after Trump paused his tariffs," a dealer at a state-owned bank said.

The dollar index had eased on Monday after US President Donald Trump agreed to pause imposition of tariffs on Canada and Mexico. However, tariffs on China came into effect on Tuesday without any disruption. Investors now await the meeting between the presidents of the US and China later this week, as per reports.

However, Beijing on Tuesday announced a 15% tariff on coal and liquefied natural gas imports from the US. It also imposed 10% additional tariff on oil and agricultural equipment imports from the US. China said it would probe the tech giant Google for alleged antitrust violations. All these measures announced by China on Tuesday raised investors' concerns over a possible trade war between the two countries.

Following these developments, the dollar index rose, and was at 108.90 at 1146 IST. The index, which measures the strength of the dollar against a basket of six major currencies, was 108.43 on Monday and 108.50 on Friday. 

The rupee also came under pressure as banks purchased the greenback, on behalf of importers, wary of a further fall in the Indian unit. Also, market participants expect the Reserve Bank of India to lower the repo rate by 25 basis points, on Friday, which will likely drag the rupee further down.

However, a rise in domestic equities lent some support to the local unit, according to some dealers. At 1148 IST, the benchmark indices, the Nifty 50 and the BSE Sensex were each up 0.8%. For the rest of the day, the rupee is seen moving in a range of 86.95-87.20 against the dollar. Dealers see immediate technical support for the Indian unit at 87.15 a dollar.  (Gowri Lakshmi) 

India Rupee: Technical Levels for rupee - Feb 4

MUMBAI – At 1123 IST, the rupee was at 87.1050 per dollar. At 0900 IST, the rupee was at 87.0350 a dollar against its previous close of 87.1850. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi and Sourabh)

India Rupee - Asia FX: Most up as dlr index fell after Trump pauses tariffs

MUMBAI – Most Asian currencies rose in early trade Tuesday as the dollar index eased from a three-week high after US President Donald Trump on Monday agreed to pause the imposition of tariffs on Canada and Mexico for 30 days.  The pause came after the two countries showed intent to work towards Trump's demands. While the 10% tariff on China is still scheduled to come into effect later in the day, the White House said Trump plans to talk to Chinese President Xi Jinping in a couple of days.

At 1038 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 108.78. It fell from a three-week high of 109.88 on Monday to close at 108.43. On Friday, the index was 108.50.

The Indonesian rupiah and the Philippines peso were up 0.5% each against the greenback. A rise in their respective domestic stock market indices also aided their currencies. The Philippines benchmark index, the PSEI, was up 2.5% on Tuesday. The Indonesian benchmark index, Jakarta Composite Index, was up 1.2%. 

The Malaysian ringgit was up 0.4% against the greenback. The Taiwan dollar was up 0.3% against the US unit. However, gains in the currency were limited after data showed consumer confidence in Taiwan weakened to an 8-month low amid concerns over global uncertainties. The January consumer confidence index fell 2.07 points from the previous month to 72.54, the survey showed.

The South Korean won was up 0.1% against the US dollar. However, data on Monday showed the country posted the largest decline in retail sales since the 2003 credit crisis. According to government data, retail sales fell 2.2% in 2024 from the previous year. 

The Thai baht traded flat against the greenback amid a growing tussle between the finance ministry and Thailand's central bank. "We would like to see a reduction in the policy interest rate this year to be more in line with our economic fundamentals and to help the manufacturing sector, which is still a problematic sector this year," said deputy finance minister Paopoom Rojanasakul. 

The financial markets in China remained shut on account of Lunar New Year and will resume on Wednesday.  (Gowri Lakshmi and Sourabh Kumar)

India Rupee: Up as dlr index falls from 3-wk high after Trump's tariff pause

MUMBAI – The rupee rose against the dollar Tuesday as the dollar index eased from a three-week high on Monday after US President Donald Trump paused imposition of tariffs on Mexico and Canada, dealers said. 

"There is less movement, and people are kind of waiting to see what comes out of Trump's meeting with the Chinese president," a dealer with a state-owned bank said. "After the pause, the rupee came up, and I am expecting a further rise in the rupee if there is a deal between the US and China."

The dollar index eased after Trump on Monday agreed to pause tariffs on Canada and Mexico for 30 days. The pause came after the two countries showed intent to work towards Trump's demands. While the tariff announced on China is still scheduled to come into effect from Tuesday, Trump planned to talk to Chinese President Xi Jinping in a couple of days.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 108.70 at 0916 IST, against 109.50 at close of the Indian market on Monday. The index was at 108.50 on Friday.

Importers are unlikely to place large bets, dealers said. "Importers will wait for any lower (dollar/rupee) movement, and then buy dollars," a dealer with another state-owned bank said. As for exporters, most of them were waiting for the rupee to fall to at least 87.50 a dollar before placing any large bets, dealers said.

During the day, the rupee is seen moving in a range of 86.80-87.30 against the dollar. Dealers see immediate technical resistance for the Indian unit at 86.95 a dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Feb 4

MUMBAI – Following are the expected support and resistance levels for the rupee on Tuesday, as forecast by leading banks and brokerages in an Informist poll:

(Sourabh Kumar and Pratiksha)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Tanima Banerjee

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