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MUMBAI: The Indian rupee is poised to open higher on Tuesday amid swings in the U.S. dollar, spurred largely by the news flow and headlines related to U.S. President Donald Trump’s tariff plans.

The 1-month non-deliverable forward indicated that the rupee will open at 86.36-86.38 to the dollar, compared with its close of 86.5675 in the previous session.

At one point in the Asia session, the dollar index dropped to a two-week low of 107.86 amid news that Trump’s new administration will not immediately impose trade tariffs.

Trump will issue a broad trade memo that stops short of imposing new tariffs on his first day in office, an official for the new Trump administration said.

The dollar index recovered to 108.40 after Trump said he plans to impose tariffs on Canada and Mexico by Feb. 1.

The 1-month USD/INR non-deliverable forward was at 86.62, having briefly dropped below 86.40.

“This is how it is going to be now that Trump is in charge… choppy and volatile,” a currency trader at a bank said.

The rupee will largely “do what the yuan does” and what the Chinese currency “does will depend on what Trump does”, he said.

The offshore Chinese yuan , having rallied to 7.25 to the U.S. dollar at one point, was at 7.2850.

Indian rupee ends weaker

Trump’s plan for tariffs is a major focus area for investors. The size and extent of the tariffs will dictate whether the dollar’s rally since his election victory will hold up.

With tariffs likely to be inflationary, it will also likely dictate the outlook on the number of rate cuts the Federal Reserve will deliver this year.

“There will be a huge amount for markets to digest this week,” ANZ Bank said in a note.

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