MUMBAI: The Indian rupee is expected to extend its rally on Friday, supported by a broad-based slump in the US dollar on concerns that the sweeping US tariffs will hinder economic growth.
The one-month non-deliverable forward indicated that the rupee will open at 85.28-85.30 per dollar compared with its close of 85.43 in the previous session.
The currency, boosted by the dollar’s weakness and position unwinding, is trading near its yearly high.
It started Thursday on a weak note due to risk aversion before staging a recovery. If the rupee “held up on a day like yesterday, you have to wonder what will trouble it,” a currency trader at a bank said.
“I keep thinking that there is no more downside (on the dollar/rupee pair) and yet it keeps falling.”
The dollar index plummeted nearly 2% on Thursday, logging in its worst day in more than two years, amid worries that President Donald Trump’s more severe-than-expected tariffs would lead to higher inflation and hurt growth.
Trump said he would impose a 10% baseline tariff on all US imports and higher duties on India and several other countries.
Indian rupee rally interrupted in run up to Trump’s tariffs
The blowback on the US economy “leaves the dollar naked” and investors fearing the impact on confidence and activity, ING Bank said in a note.
The concerns over US growth have prompted investors to lift their expectations to four rate cuts by the Federal Reserve this year, starting in June.
The 2-year US yield is at its lowest in six months. Asian currencies were up on the day, with the Korean won leading the way. Equities, meanwhile, added to Thursday’s decline.
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