MUMBAI: The Indian rupee is expected to open largely unchanged on Wednesday, shrugging off the modest boost to its Asian peers after a U.S.-Japan trade deal fuelled hopes that Washington may strike similar agreements with other countries.
The 1-month non-deliverable forward indicated the rupee will open in the 86.35-86.38 range versus the U.S. dollar, compared with 86.3675 on Tuesday.
The rupee will “receive mild help” at open on account of Asia, a currency trader at a Mumbai-based bank said.
“However, dips (on USD/INR) have been bought into quickly and the odds favour a repeat of that,” he said, adding, “I will definitely not be looking to sell USD/INR currently.”
On Tuesday, the rupee briefly recovered to 86.22 before slipping to a one-month low of 86.4125 on likely outflows and hedging.
The currency has declined in seven of the last eight sessions, dropping 0.7% so far this month.
Shares in Tokyo jumped and U.S. equity futures rose after U.S. President Donald Trump announced a trade deal with Japan, lowering proposed tariffs on Japanese imports to 15% from 25%. The agreement lifted the yen and other Asian currencies.
The U.S.-Japan deal comes just days ahead of the August 1 deadline set by Trump for finalising trade agreements or face steep tariffs.
The scheduled rollout of the reciprocal tariff on 1 August “looms large”, MUFG Bank said in a note.
“In the absence of new US trade deals, there’s a risk that tariff levels could revert to the steeper rates announced during Liberation Day in April. This uncertainty is weighing on the U.S. dollar.”
On Tuesday, Trump announced a new 19% tariff on goods from the Philippines, just below the 20% rate he had previously threatened to impose.
India, meanwhile, has yet to reach a trade agreement with the United States and the prospects of an interim trade deal before the August 1 deadline have dimmed.
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