Rupee buckles under position unwinding; dollar demand builds
Live Events
(You can now subscribe to our
(You can now subscribe to our ETMarkets WhatsApp channel
The Indian rupee declined for the sixth time in seven sessions on Wednesday, slipping briefly past 86 to the U.S. dollar, as traders unwound bullish positions amid persistent demand for the greenback.The rupee weakened to 86.0225 on Thursday before recovering marginally to end the day 0.4% lower at 85.90.The Indian currency has declined nearly 1.5% from a high of 84.78 it touched last Monday, making it one of the worst-performing Asian currencies over this period."There is no real let-up in dollar demand from corporates and it would seem that dollar/rupee shorts are done for now, both in onshore spot and in the non-deliverable forward market," a currency trader at a bank said.Speculators are no more inclined to sell the dollar/rupee pair on rallies, unless "things improve" for the rupee, he said.The rupee has been underperforming regardless of what the dollar index or Asian peers are doing."Frankly, most of us didn't expect this," the trader said, forecasting more losses for the rupee in the coming days.Forex advisors are urging clients with near-term dollar payables to exercise caution.The risk-reward favours "proactive cover" rather than waiting for dips on dollar/rupee, Kunal Kurani, vice president at Mecklai Financial said.The dollar index was marginally higher on Wednesday. Market focus is on the May U.S. non-farm payrolls report on Friday, which could influence expectations around the Federal Reserve's policy path.Asian currencies were mostly weaker awaiting updates on U.S. trade deals. President Donald Trump 's administration has set a Wednesday deadline for revised trade proposals from key partners.A call between Trump and Chinese President Xi Jinping is reportedly in the works amid mutual accusations of backtracking on tariff rollback commitments.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Time of India
29 minutes ago
- Time of India
Trump's tariff chaos threatens his push for rust belt revival
US President Donald Trump 's signature trade policy is threatening to backfire by upending other top priorities: the revival of US manufacturing and the American Rust Belt . In Illinois, Trump 's tariffs prompted a compressor maker to delay a key equipment purchase after an ambitious factory revamp. Rockwell Automation Inc., a Wisconsin-based producer of factory tools, says some manufacturers are putting projects on hold because of uncertainty over costs and future demand. Snap-on Inc. is seeing similar hesitancy among car mechanics. The warnings underscore the rising worry that turbulence from Trump's trade wars will smother the progress US manufacturers have already made revving up American factories. Manufacturing payrolls fell by 8,000 last month, the most this year, according to the Bureau of Labor Statistics. US and Chinese negotiators will resume trade talks Monday in London, as the world's two largest economies look to resolve disputes over tariffs and technology. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Ready-to-Move Flats in Chattarpur South Delhi A D Infra Get Info Undo In the US, perhaps nowhere is the anxiety higher than in the Midwest, which is still home to the nation's highest concentration of manufacturing employment even after bleeding jobs early this century from the rise of offshoring. 'Overall, it is going to be a drag on the US economy ,' said Gus Faucher, chief economist for PNC Financial Services Group in Pittsburgh, calling the tariffs a tax that will raise prices. 'In particular, it's going to be a drag on the Midwestern economy.' Live Events Bloomberg On-again, off-again levies on imported components and machinery — as well as retaliatory duties imposed by other countries — have injected volatility into supply chains, raised costs, hurt exports and chilled investment. US factory activity contracted for a third straight month in May, and every comment in the Institute for Supply Management's sample of survey responses from manufacturing executives focused on tariffs — including a respondent in the electric equipment, appliance and components business who said the duties have created supply-chain disruptions rivaling those of the pandemic. The Midwestern states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin lost almost 2 million manufacturing jobs between 1998 and 2010 as trade deals and China's entrance into the World Trade Organization spurred companies to seek lower-cost labor and production outside the US. In recent years, though, a cautious optimism had returned. As supply chain shocks from the pandemic pushed companies to bring operations back home, and as Washington offered sweeping incentives for clean energy, EVs and semiconductor production, the Midwest began to stir. Since the start of 2021, the region has added over 100,000 factory jobs, according to federal data. Rust Belt states had outsized investment in factories in the past decade, according to a report by Citi Institute, even as southern states that offer right-to-work laws, lower labor costs, and aggressive incentive packages to lure global manufacturers have also seen a boom. The White House has pointed to the announcements of big planned investments in the US by companies and foreign governments as proof the president's trade policies are working. Case in point: When Trump traveled to the Pittsburgh area late last month to champion a deal between United States Steel Corp. and Nippon Steel Corp., he touted his plans to increase import duties on steel and aluminum to 50% from 25%. Still, growth in overall US private construction spending on manufacturing has flatlined from the boom seen under the Biden administration. Bloomberg How Trump's approach plays out in the long term remains to be seen. For now, however, the constant shifting of his tariff strategy has 'got people spooked,' said Andrew Anagnost, chief executive officer of Autodesk Inc., which sells software used by manufacturers to design factories and improve manufacturing processes. 'The current operating mode is just the death to long-term investment,' Anagnost said. Construction work that was already underway or in the backlog is continuing but the uncertainty 'is stalling future projects.' Milwaukee-based Rockwell Automation has already seen some investments get delayed because of uncertainty about how tariffs will affect business. The uneasiness is particularly acute in the automotive industry, which is trying to rewire a global supply chain designed for the old economic order, and in other capital-intensive projects for the long term, CEO Blake Moret said. Snap-on, which provides tools used by automotive mechanics, can manage the impact of tariffs with minimal disruption because it mostly serves US customers with domestically made products, said CEO Nicholas Pinchuk. But while auto shops are still busy and profitable, they're 'confidence poor,' he said, adding that customers of the Kenosha, Wisconsin-based company are wary of economic disruption even if they support Trump politically. 'They're still big Trump fans. This is Trump territory,' he said. 'They believe in where we're going, but they're worried that something's going to happen.' Even manufacturers that are positioned to gain from tariffs are anxious. Faribault Mill, one of the last vertically integrated US textile mills in an industry devastated by offshoring, has been getting calls from from retailers looking for a domestic producer, said CEO Ross Widmoyer. But despite a projected fifth straight record sales year at the Minnesota-based maker of blankets, throws and apparel, Widmoyer said he's concerned about weakening economic growth. 'If there's a slowdown in consumer spending, it doesn't matter if you're making products domestically or overseas, and that's not good for anybody,' said Widmoyer, who is also chairman of the Minnesota Manufacturers' Council. In Decatur, Illinois, TCCI Manufacturing was completing a $45 million factory revamp just as Trump slapped steep new tariffs on countries around the world. With US duties on China zigzagging between 30% and 145% in just weeks, TCCI decided to shelve the purchase of crucial Chinese-made testing equipment it needs by early next year. The factory makes compressors used in EVs. The company has evaluated alternative sources for the equipment, but 'the problem with that is we don't know what the tariffs are doing,' TCCI President Richard Demirjian said as the company opened the factory earlier this year. TCCI still has high hopes for the plant despite the uncertainty around tariffs and moves by congressional Republicans to roll back federal sweeteners for electric-vehicle purchases. The facility is now called the Clean Energy Innovation Hub, evoking the manufacturer's bet on the future. As a symbol of the region's past, Demirjian drove his father's maroon 1927 Model T to the plant's grand re-opening in April. Illinois Governor JB Pritzker spoke at the ribbon-cutting ceremony and touted the factory as the first to benefit from the state's Reimagining Energy and Vehicles program, which provided part of more than $21 million that TCCI received in state incentives for the project. But Pritzker, a Democrat widely seen as a potential presidential candidate in 2028, warned that erratic policy-making is undercutting efforts to bolster US manufacturing. 'Tariffs are on, tariffs are off, tariffs are up, tariffs are down,' Pritzker said. 'Imagine trying to run a business and figure out from day to day how you're going to do pricing, who you're going to do business with, based upon where the tariffs are being imposed.'
&w=3840&q=100)
Business Standard
29 minutes ago
- Business Standard
US, China to resume trade talks amid tensions over rare earths
Top officials from the Trump administration will meet with their Chinese counterparts in London on Monday for a second round of economic talks, aiming to cement a trade truce between the world's two largest economies. The American delegation will be led by Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Jamieson Greer, the United States' trade representative. China will be represented by He Lifeng, the country's vice premier for economic policy, who led the previous round of talks in Switzerland. The meetings are expected to run through Tuesday, according to people familiar with the matter. The talks come at a delicate juncture for the global economy, which has been slowed by uncertainty and supply chain disruptions. In April, the United States paused some of the tariffs that Trump imposed on dozens of countries to provide time for trade negotiations. Those levies, as well as steep import taxes on Chinese goods, were thrust into further uncertainty in late May, when a US trade court deemed them illegal. The tariffs, however, remain in place while an appeal process unfolds. As the US delegation negotiates in London, the Trump administration faces a deadline to make its case to a federal appeals court for why the tariffs should continue. The legal limbo surrounding the tariffs could weaken the Trump administration's hand as it tries to negotiate a broader agreement to give American businesses greater access to China's market, push Beijing to buy more American products and attract more Chinese investment to build factories in the United States. At the same time, the Trump administration wants to make some tariffs essentially permanent to discourage a flood of Chinese exports of manufactured goods. In China, a slow-motion housing market collapse over the past four years has wiped out much of the savings of the country's middle class, leaving hundreds of millions of households reluctant to spend. China has tried to offset weak consumer spending at home with a huge, government-financed campaign to build factories and ramp up exports. But the Trump administration, like the Biden administration before it, has been wary that these exports could crush what is left of America's manufacturing sector, which is only half the size of China's. The Trump administration has cited trade imbalances as justification for tariffs against China and dozens of other countries, many of which pay for their own trade deficits with China by running large trade surpluses with the United States. Trump's trade agenda has upended international commerce this year, sending economic allies and adversaries scrambling to negotiate deals with Washington in hopes of a reprieve on tariff threats. The abrupt announcement of tariffs on America's largest trading partners have often been followed by reversals or pauses, forcing businesses to adjust their plans on the fly and rattling investors. The first round of negotiations between China and the United States, in Geneva last month, ended with promise. The countries agreed to temporarily reduce their tariffs, which exceeded 100 percent as a tit-for-tat trade war escalated. The two sides also agreed to hold additional talks as they worked to lower the temperature. However, the truce appeared to fray in recent weeks. China maintained strict curbs on exports of rare earth magnets that have crippled supply chains. Partly in response to those export curbs, among other things the Trump administration suspended sales to China of technologies related to jet engines, semiconductors and certain chemicals and machinery as well as proposed a plan to revoke visas for Chinese students associated with the Communist Party or studying in certain fields. The standoff frustrated Trump, who lashed out at China on social media and accused it of 'violating' the Geneva agreement. China hit back, arguing that it was the United States that was undermining the deal. A 90-minute conversation between Trump and Xi Jinping, China's leader, this week appeared to ease the tension. Trump suggested that the questions surrounding China's restrictions on critical minerals known as rare earths, and magnets made from them, had been addressed and that talks would proceed. Trump also seemed to soften his administration's stance on visas for Chinese students. It remains unclear what additional concession Washington or Beijing might be prepared to make in a broader economic agreement. The addition to the US delegation of Lutnick, who was not part of the talks in May, suggested that there could be greater discussion of American export controls, which his agency oversees. The Trump administration also expressed concerns about China's currency practices in a report to Congress this week. Although it declined to formally label China a currency manipulator, the report warned that it might do so in the future if it found evidence that suggested China was weakening its currency. The talks in London come as many factories in the United States, Europe and Japan are quickly running out of rare earth magnets, for which China produces 90 percent of the world's supply. Beijing announced on April 4 that it would require export licenses for all exports of seven rare earth metals and magnets made from them, which are widely used in cars, drones, speakers, fighter jets and ballistic missiles. Kevin Hassett, director of the White House National Economic Council, said in an interview on CBS's 'Face the Nation' on Sunday that a goal of the talks would be to get shipments of rare earths from China 'to flow just as they did before the beginning of April.' Rare earths are a family of 17 metals found near the bottom of the periodic table. China is particularly dominant in the processing of the seven for which it now requires licenses to export, producing up to 99.9 percent of the world's supply. The big question lies in what concessions by the United States and others will prompt Beijing to allow further shipments of rare earths. In addition to pressing the United States to remove Trump's tariffs on Chinese goods, China's Ministry of Commerce said on Saturday that it had offered to speed up the approval of rare earth exports to Europe. But the ministry also called for the European Union to remove its recent tariffs on imports of electric cars from China, and it called for the bloc to allow more sales of high-tech goods to China. Under pressure from the United States, the Netherlands has limited the sale to China of equipment for manufacturing the most advanced semiconductors, which have many military as well as civilian applications.
&w=3840&q=100)
Business Standard
30 minutes ago
- Business Standard
Sebi investigates Jane Street's derivatives trades over three years
India's markets regulator is investigating Jane Street's derivatives trades stretching back three years to check if one of the world's largest quant trading firms intended to manipulate the country's benchmark stock indexes, according to two sources with direct knowledge of the matter. The investigation - the largest such into a global trading firm - follows a series of steps taken by the Securities and Exchange Board of India (SEBI) to cool the frenzy in India's derivatives markets. SEBI is investigating Jane Street, Jane Street Singapore Pte and JSI Investments, the firm's India unit, and studying the firms' algorithmic trading strategies in the National Stock Exchange's index of top 50 stocks and its index of banking stocks, one of the sources said. "The investigation is to establish whether there was a repeated pattern of taking outsized derivatives positions in index constituents, particularly bank stocks, then trade the index in the physical market to profit from its position," the source said. While India does not impose any restrictions on traders from taking intraday positions in derivative as well as physical markets, surveillance systems typically signal repeated patterns of taking positions in excess of 10 billion Indian rupees ($116.93 million). A report is being prepared with assistance from the stock exchange, following which the U.S.-based trading firm will be sent a regulatory notice to explain its trades. The sources declined to be named as the investigations are confidential. Jane Street and SEBI did not respond to several requests for comment. The investigation stemmed from large profits made by Jane Street on its India derivatives positions - nearly five times the profit made by the second largest trading firm, the second source said. Known for high-frequency trading and its dominance of the exchange traded funds market, Jane Street's net trading revenue for 2024 stood at $20.5 billion globally, according to Bloomberg. As of December 2024, the firm's revenue from India operations stood at 200 billion Indian rupees ($2.34 billion), the second source added. The firm started its India operations in December 2020. Complaints from other large institutional firms on Jane Street's trade practices also prompted the investigation, the sources said. Jane Street last year sued a rival hedge fund, Millennium Management, accusing it of stealing a valuable in-house trading strategy. At a court hearing, it was revealed that the strategy involved India options and had generated $1 billion in profits for Jane Street in 2023. The two firms settled the case in December. INCREASED SCRUTINY The investigation has also prompted SEBI to increase monitoring of intraday positions to watch for large concentrated trades in index stocks, the two sources said. SEBI and stock exchanges are currently drafting a mechanism to do this, said the sources, adding that large positions for consecutive days could prompt investigation. The thresholds for such investigations are still being finalised. Exchanges will also be asked to periodically audit algo programs of large trading firms, which are already required to get approval from exchanges before using the programs. ($1 = 85.8370 Indian rupees)
