Rupee slips after recovery fizzles out on outflows, oil dollar bids; forward premiums jump
The rupee opened higher, tracking the dollar's broad retreat following a weaker-than-expected U.S. jobs report that raised expectations of a September rate cut by the Federal Reserve. However, dollar buying from importers, particularly state-run oil companies, caused the local currency to drop.
The rupee was at 87.6050 at 13:12 IST, to the U.S. dollar, off the day's high of 87.2250 and down from Friday's level of 87.5400.
"There has been importer buying through the session, outflows are adding to the pressure," a trader at a private sector bank said.
"Despite the soft dollar, the demand on (USD/INR) dips is intact."
Traders said the rupee's moves on Monday reflect India-specific demand for dollars and an overall weaker trend.
The rupee had climbed to near 87.20 in opening trades amid the market pricing in a roughly 80% chance of a Federal Reserve rate cut in September meeting following the jobs report.
Further, MUFG Bank pointed out in a note that market pricing for Fed rate cuts has increased to 64 basis points for the remainder of the year, up from 33 prior to the payrolls release.
U.S. bond yields pushed lower on Friday.
On back of the drop in U.S. yields and Fed rate cut expectations, USD/INR forward premiums climbed. The implied yields on the 1-year forward premium rose 9 basis points to 2.05%.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
22 minutes ago
- Reuters
Indian equity benchmarks open muted as investors assess Trump's tariff threat
Aug 5 (Reuters) - India's equity benchmarks opened little changed on Tuesday after U.S. President Donald Trump reiterated his threat of harsh tariffs on goods from India over its Russian oil purchases. The Nifty 50 (.NSEI), opens new tab fell 0.01% to 24,720.25 points and the BSE Sensex (.BSESN), opens new tab lost 0.09% to 80,946.43 as of 9:15 a.m. IST. Trump on Monday threatened to raise tariffs on goods from India over its Russian oil purchases, while New Delhi called his attack "unjustified" and vowed to protect its economic interests, deepening the trade rift between the two countries. Analysts said the ongoing trade rift has hit the market sentiment, and expect the benchmarks to be rangebound until there is clarity over U.S. tariffs. Nine of the 16 major sectors logged gains at the open. The broader smallcaps (.NIFSMCP100), opens new tab and midcaps (.NIFMDCP100), opens new tab were flat.
Reuters
22 minutes ago
- Reuters
Old trees and aging farmers worsen outlook for top palm oil exporters
Malaysian smallholder oil palm farmers like Suratmen and Mohd face a dilemma that threatens to sap supply from the world's top palm oil exporters and drive up prices of the vegetable oil essential to billions of consumers worldwide in the next five years. Gabe Singer reports.
Reuters
22 minutes ago
- Reuters
Toyota, Honda brace for profit falls as US tariffs, strong yen weigh
TOKYO, Aug 5 (Reuters) - Toyota Motor (7203.T), opens new tab and Honda Motor (7267.T), opens new tab are expected to report weaker first-quarter earnings this week, as U.S. import tariffs and a stronger yen weigh on profits despite solid demand for hybrids in their biggest overseas markets. Japanese automakers face growing uncertainty in the U.S., where tariffs on imports are pushing up vehicle prices and testing the resilience of consumer demand. Investors will be watching for clues on how Japan's two largest automakers are offsetting such burdens. Toyota, the world's top-selling automaker, is forecast to post a 31% year-on-year drop in operating profit to 902 billion ($6.14 billion) yen on Thursday, according to the average estimate of seven analysts polled by LSEG. That would mark its weakest quarterly result in more than two years. Honda is expected to report a 36% decline in operating profit to 311.7 billion yen on Wednesday, its second straight quarterly drop. The automaker has already forecast a 59% fall in full-year profit. Both companies face the prospect of 15% tariffs on Japanese auto imports into the U.S. from levies totalling 27.5% previously, following a bilateral trade deal last month. Other Japanese automakers and suppliers have also flagged weaker earnings, citing the same pressures from tariffs and the stronger currency compared to the same period a year ago. "The first quarter is going to be a rough one for Toyota," said Christopher Richter, autos analyst at CLSA. "Things should get easier going forward," he said, citing some relief from the lowered tariffs. Particularly Honda's reliance on the U.S. has deepened in recent years as sales in other regions falter. Outside of the U.S., both companies produce key models for the U.S. market in Canada and Mexico. For Honda, the U.S. accounted for around two-fifths of total sales in the first half of the year. Its global sales fell 5% over the period, dragged down by double-digit declines in China, Asia and Europe. Toyota's global sales rose 6% over the period supported by strong demand for petrol-electric hybrids which typically carry higher margins than conventional petrol cars. Its Camry and Sienna hybrids remain strong sellers in the U.S. The company has also performed better in China in recent months, posting a 7% year-on-year increase in vehicle sales over the first half of the year. Honda said in May that it was scaling back its investment in electric vehicles given slowing demand and would be focusing on hybrids with various revamped models. It had earlier delayed plans to build an EV production base in Canada due to slowing demand for electric cars. Investors will be looking for updates from both companies on their pricing strategy and any revisions to full-year forecasts. The Japanese automakers have been taking measures such as transfer pricing to help alleviate the burden from the import tariffs, CLSA's Richter said. Shares of Toyota are down 16% so far this year, while those of Honda are flat. ($1 = 146.8900 yen)
