MUMBAI: The Indian rupee is set to decline at open on Wednesday following swings in the Chinese yuan prompted by US-China trade jitters, and as traders await the Reserve Bank of India’s rate decision.
The 1-month non-deliverable forward indicated that the rupee will open at 86.35-86.40 to the U.S. dollar compared with its close of 86.2650 in the previous session.
Right now, it’s all about the yuan for Asia, a currency trader at a private bank said.
“If China signals tolerance for more depreciation, it could trigger a regional ripple. The RBI policy decision, to be honest, is taking a back seat.”
The offshore Chinese yuan plunged past 7.40 per dollar to an all-time low on mounting Sino-U.S. trade tensions.
U.S. President Donald Trump threatened to ratchet up tariffs to 104% in response to China’s decision to match “reciprocal” duties Trump announced last week.
Indian rupee slumps in NDF market on risk rout sparked by US tariffs
That rate will be effective from 0401 GMT on Wednesday, a White House official said after Beijing did not lift its retaliatory tariffs by the deadline set by Trump.
It remains to be seen if China’s central bank will abandon its calibrated approach to keep USD/CNY basically stable and discourage one-way depreciation bets, DBS Research said in a note.
RBI to deliver rate cut
The RBI is widely expected to deliver a 25 basis point rate cut as part of its policy decision, due at 10:00 a.m. IST, amid slowing inflation and growth uncertainty posed by the U.S. tariffs.
“There is speculation that the RBI should front-load rate cuts with a 50 bps cut in April. That may be too premature given ongoing bilateral trade negotiations,” IDFC Bank said in a note.
Beyond the rate decision, investors will closely monitor the RBI’s commentary and a potential change in stance for future policy clues.
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