The Indian rupee is expected to recover on Tuesday, thanks to the dollar’s decline after US President Donald Trump delayed tariffs on Canada and Mexico by a month. The 1-month non-deliverable forward indicates that the rupee will open at 86.96-86.98 to the US dollar, up from 87.1850 in the previous session.
The move comes as China tariffs are set to come into effect on Tuesday, but some analysts suggest that a delay could lead to a larger decline in the dollar. The offshore Chinese yuan recovered to 7.3110 to the US dollar after Trump’s announcement.
While the tariff relief brings some relief to the rupee, analysts remain uncertain about its long-term impact. “It remains too early to tell” if the current reprieve will last, said MUFG Bank in a note.
The suspension of tariffs also raises questions about Trump’s strategy and whether he wants to use them as a negotiating tool to draw out concessions from his trading partners. Data released on Monday showed that US manufacturing activity expanded for the first time in two years, which may support expectations that the Federal Reserve will not cut interest rates at the March meeting.
Key indicators include:
* One-month non-deliverable rupee forward: 87.18
* Dollar index: 108.70
* Brent crude futures: $75.4 per barrel (down 0.7%)
* Ten-year US note yield: 4.57%
* Foreign investors sold a combined net $0.1mln worth of Indian shares last Friday and Saturday
* Foreign investors bought a net $33.8mln worth of Indian bonds on Feb. 3
Source: https://www.reuters.com/markets/currencies/trumps-tariff-reprieve-bring-relief-rupee-focus-china-2025-02-04