Indian rupee pinned near all-time low on weak Asia, enduring US trade troubles

MUMBAI: The Indian rupee is likely to hover near its lifetime low at open on Tuesday, dragged by weakness across Asia and persistent US trade tensions that have strained New Delhi’s economic ties with Washington.

Non-deliverable forwards indicated the rupee would open at 88.74–88.78 to the dollar, little changed from Monday’s 88.76 level and near the lifetime trough of 88.7975 struck last week.

Persistent strain on the rupee has built up in recent weeks, driven by the drag from U.S.-India trade frictions.

Washington’s 50% punitive tariffs on Indian goods and the hike in H-1B visa fees, which is expected to hit India harder than any other country, have driven foreign investors to pull money out of equities.

Last week, foreign investors pulled out $1.8 billion, with preliminary data showing more than $300 million sold on Monday.

“Most were thinking the 50% tariff would come down to 25% through talks - looks like that’s not happening anytime soon,” a currency trader at a Mumbai-based bank said.

“Then you throw in the H-1B visa news, and the pick up in equity outflows,” keeping the rupee under persistent strain, he added.

The Reserve Bank of India has been stepping in to slow the rupee’s slide without which, bankers say, the Indian currency would have fallen much more.

Asia falters

At Tuesday’s open, the rupee faces pressure from weaker Asian peers and a modest rise in the dollar index.

Investors are wary of a potential U.S. government shutdown, which could delay key economic data, including this week’s key jobs report.

Economists at Morgan Stanley expect each week of a shutdown to shave about 10 basis points off real U.S. GDP. U.S. long maturity Treasuries rallied on Monday.