Relief for Indian rupee on risk rally after Trump walks back Europe tariff threat

MUMBAI: The Indian rupee is poised to rise at the open on Thursday, boosted by a broader risk rally after U.S. President Donald Trump stepped back from threats to impose tariffs on Europe over Greenland, allowing the currency to recover from record lows.

The 1-month non-deliverable forward indicated the rupee will open in the 91.50-91.55 range versus the U.S. dollar after dropping 0.8% to 91.6950 on Wednesday that saw the currency hit a lifetime low of 91.7425.

The rupee’s slide came despite what bankers said was intermittent central bank presence in the latter half of Wednesday’s session, though several said the price action did little to suggest meaningful intervention.

One banker noted that the currency continued to weaken despite sizeable dollar offers appeared via state-run banks, likely on behalf of the Reserve Bank of India.

Another said the “deluge of (dollar) demand” was so overwhelming that any intervention, if it occurred at all, was effectively absorbed by the market.

He added that the market’s focus through Thursday’s session will be whether such demand returns once the currency stages the modest recovery at open.

The Indian currency is set to find relief at the open on Thursday, drawing support from a rally in U.S. equities and Asian shares after Trump, speaking at the World Economic Forum in Davos, said the U.S. would not proceed with tariffs on Europe that were scheduled to take effect from February 1.

His remarks ruled out an immediate ratcheting up in trade tensions and followed comments dismissing the use of force to take Greenland.

However, analysts cautioned that the shift in tone will not fully dispel the underlying uncertainty.

“While the more conciliatory tone of the speech helped to assuage market concerns regarding tail risk scenarios, it’s likely geopolitical developments will remain front and centre for markets and volatility will remain elevated over the coming days,” ANZ Bank said in a note.