By Nimesh Vora
MUMBAI (Reuters) -The rupee is set to open higher on Monday, supported by its recovery in the non-deliverable forward market, while traders remain focused on potential fallout from U.S. tariffs and the upcoming U.S. inflation data.
The 1-month non-deliverable forward indicated the rupee will open in the 87.52-87.56 range versus the U.S. dollar, compared with 87.66 on Friday.
The NDF move feels “purely positional” and there was no real shift in underlying sentiment, a currency trader at a Mumbai-based bank said, with the structural bias on USD/INR remaining higher till the tariff overhang is in play.
The tactical adjustment in NDF likely reflects some trimming of heavy-dollar positions, with the Reserve Bank of India’s intervention likely prompting speculators who were betting on a quick leg higher in USD/INR to think twice, the trader said.
Over the last two weeks, the RBI has intervened in the non-deliverable forward and onshore spot markets to cushion the rupee against tariff pressures stemming from U.S. President Donald Trump’s actions.
SOFT US DOLLAR
A broadly softer dollar, on growing bets of a Federal Reserve rate cut next month, is expected to aid the rupee amid the tariff noise. The dollar index fell on Monday, extending losses from last week, while most Asian currencies advanced.
July U.S. inflation data, due on Tuesday, will be key to gauging Fed rate-cut expectations and the dollar’s direction.
While the full impact of the latest tariffs may take time to filter into the inflation numbers, the July print will still be heavily scrutinised, MUFG Bank said in a note, adding that June data already showed signs that tariff rates are starting to have a bigger impact.
Traders currently see a 90% chance of a September Fed rate cut and are pricing in just over two cuts for the year.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 87.66; onshore one-month forward premium at 12 paise
** Dollar index down at 98.08
** Brent crude futures down 0.5% at $66.3 per barrel
** Ten-year U.S. note yield at 4.28%
** As per NSDL data, foreign investors sold a net $629.4 million worth of Indian shares on Aug 7
** NSDL data shows foreign investors bought a net $69.1 million worth of Indian bonds on Aug 7
(Reporting by Nimesh Vora; Editing by Ronojoy Mazumdar)
