US tariff threat to keep rupee on the ropes ahead of RBI rate call
The 1-month non-deliverable forward suggests the rupee will open slightly weaker against the U.S. dollar from Tuesday's level of 87.80.
The currency dropped as much as 87.8850 on Tuesday, just shy of its record low of 87.95 hit in February.
Bankers said the rupee avoided hitting a fresh lifetime low, thanks to likely dollar sales by the Reserve Bank of India through state-run banks. The central bank had to step in after the rupee slid following Trump's threat of substantial tariffs on Indian goods over Russian oil purchases.
"The RBI probably wanted to avoid headlines about the rupee hitting a new low on the same day Trump was ramping up tariffs," an FX trader at a private bank said.
"87.90–88 is the key zone to watch. If the RBI does cut rates today, we'll most likely break past that, and the central bank may allow some weakness."
About three-quarters of the 57 participants in a Reuters poll expect the RBI to leave the policy rate unchanged at 5.50%. The rest anticipate a 25-basis point cut, following a larger-than-expected 50-bp reduction in June.
Citibank, ANZ, DBS, State Bank of India and ICICI Bank are among those expecting a rate cut. At the previous policy, SBI was the only one to predict a 50-bps reduction.
Monetary policy operates with lags, and postponing a rate cut until inflation falls further or growth weakens more visibly could result in deeper and more persistent economic damage, SBI said in a note.
"We expect RBI to continue frontloading with a 25 bps cut in August policy."
KEY INDICATORS:
** One-month non-deliverable rupee forward at 87.94; onshore one-month forward premium at 11.25 paise
** Dollar index up at 98.78
** Brent crude futures up 0.6% at $68.1 per barrel
** Ten-year U.S. note yield at 4.22%
** As per NSDL data, foreign investors sold a net $224.9 million worth of Indian shares on August 4
** NSDL data shows foreign investors bought a net $45.9 million worth of Indian bonds on August 4
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
26 minutes ago
- Reuters
SMIC second-quarter profit declined 19.5% year-on-year
BEIJING, Aug 7 (Reuters) - Semiconductor Manufacturing International Corp ( opens new tab ，China's largest contract chip maker, reported on Thursday a 19.5% year-on-year decline in second-quarter profit. Profit attributable to owners of SMIC reached $132.5 million in the June quarter, missing analysts' estimates of $183.35 million, according to LSEG data. Revenue rose 16.2% to $2.2 billion, in line with market expectations of $2.2 billion, according to LSEG.
Reuters
29 minutes ago
- Reuters
China's central bank extends gold purchases to ninth straight month in July
BEIJING, Aug 7 (Reuters) - China's central bank added gold to its reserves in July, its ninth consecutive month of purchases, official data showed on Thursday. China's gold reserves rose to 73.96 million fine troy ounces at the end of July from 73.90 million ounces at the end of June. The country's gold reserves were valued at $243.99 billion at the end of last month, up from $242.93 billion at the end of June, data from the People's Bank of China (PBOC) showed. "Continued purchases by one of the world's largest central banks signal strong underlying demand for gold," said Zain Vawda, analyst at MarketPulse by OANDA. "It reinforces the idea that this is a long-term, strategic policy decision," Vawda added. The PBOC resumed gold purchases in November 2024 after a six-month pause, a hiatus that had dampened Chinese investor demand. Gold, traditionally seen as a safe haven during times of uncertainty, scaled record highs earlier this year amid concerns over tariffs, geopolitical tensions, and central bank buying. A Reuters poll in July showed that worries over global trade and fiscal debt are driving investors toward safer assets, reinforcing gold's appeal and prompting analysts to sharply raise their forecasts. The poll of 40 analysts and traders returned a median forecast of $3,220 per troy ounce of gold for this year, up from $3,065 in a previous poll. Spot gold was trading at $3,380 an ounce, as of 0857 GMT. Meanwhile, the World Gold Council downgraded its estimate of this year's gold purchases by central banks, but added that the longer-term trend of central banks reallocating from U.S. assets to gold remains intact.
Reuters
29 minutes ago
- Reuters
Country Garden liquidation hearing delayed to January 5, court website shows
HONG KONG, Aug 7 (Reuters) - A hearing into a liquidation petition against Chinese property developer Country Garden ( opens new tab has been postponed to January 5, 2026, according to the Hong Kong judiciary's website. The hearing was originally scheduled for August 11, 2025. Once a top developer by sales in the country, Country Garden defaulted on its offshore debt in late 2023 and is now trying to garner lenders' support on its restructuring proposal that aims to cut $14.1 billion of that debt by 78%. Country Garden did not immediately respond to a request for comment. Getting enough creditor support on the restructuring proposal is essential for Country Garden to convince the court to reject the petition, which was filed last year by Ever Credit, a unit of Hong Kong-listed Kingboard ( opens new tab.
