Trump tariff salvo sees India central bank return to out-of-favour rupee derivative tool
This marks a return to a tool the central bank had largely refrained from using over the past seven months since Sanjay Malhotra took over as RBI governor and dialled back on currency intervention.
The rupee has appeared increasingly vulnerable in recent weeks amid uncertainty over whether India will reach a trade deal with the U.S. The currency posted its largest weekly decline in nearly three years last Friday, weighed down by U.S. President Donald Trump's decision to impose steeper-than-expected 25% tariffs on Indian goods.
The RBI stepped into the non-deliverable forward market last week, responding to the pressure on the currency, the bankers said.
The strain on the rupee has persisted this week following Trump's warning of punitive action over India's continued imports of Russian oil, which culminated in an additional 25% tariff on Indian goods.
The central bank may have stepped in this week too in the non-deliverable forward market, two out of the four bankers said.
The rupee dropped to a six month low of 87.8850 versus the U.S. dollar on Tuesday, coming within a whisker of its all-time low of 87.95 hit in February. It would have likely breached that level if not for the Reserve Bank of India's intervention, traders said. As of 12:56 pm IST on Thursday, the currency was trading at 87.7275.
An email to the RBI seeking comment did not draw an immediate response. The bankers spoke on condition of anonymity because they are not permitted to speak to the media.
"The Trump tariff surprise and a possible all-time high (on dollar/rupee) brought the RBI back in NDF," head of FX and rates trading at a foreign bank said, "They're not going in heavy like previously, more of a light touch just to keep things in check."
The RBI had largely stepped away from the non-deliverable forward market in recent months, significantly unwinding its positions, according to bankers.
Under Malhotra the RBI has allowed higher volatility in the rupee, marking a shift from the tightly managed approach of his predecessor Shaktikanta Das. During Das's tenure, non-deliverable forwards had become RBI's preferred mode of intervention.
Unlike onshore spot market operations, intervention through the non-deliverable forward market does not directly impact India's foreign exchange reserves or affect rupee liquidity in the domestic banking system.
The RBI's intervention in the non-deliverable forwards market last week was complemented by sustained action in the onshore spot market, which contributed to a more than $9 billion decline in India's foreign exchange reserves.
"The RBI is likely to be more aggressive in capping INR depreciation pressures given how far the currency has already cheapened over recent months in spot, NEER (nominal effective exchange rate) and REER (real effective exchange rate) terms," Singapore-based Mitul Kotecha, head of FX & EM Macro Strategy Asia at Barclays Bank, said in a note.
(Reporting by Nimesh Vora)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
India.com
6 minutes ago
- India.com
Indian Rupee Strengthens Against Us Dollar Despite Tariff Concerns
New Delhi: The Indian rupee opened stronger on Monday, amid additional 25 per cent tariff proposed by US President Donald Trump on India, which is set to take effect from August 27. The rupee likely inched up higher on optimism that the Russia-Ukraine war will end following the upcoming US-Russia negotiations on August 15, leading to removal of additional tariffs on India. The local currency opened 13 paise stronger at 87.53 against the US dollar up from 87.66 on Friday. The immediate trading range is expected to be between 87.25 and 87.80, according to analysts. The Indian rupee was expected to open with small gains today at 87.51, while markets are awaiting US and domestic inflation data. Indian markets are focused on domestic CPI and WPI inflation data, set to be released on August 12 and August 14. Additional tariffs, if implemented, are expected to put pressure on the Indian rupee against the US dollar in the short term due to reduced export revenues, capital outflows, and inflationary pressures. US' new tariffs on India are expected to affect sectors such as textiles, leather, and seafood. India sharply criticised the tariffs, calling it "unfair and unreasonable". US has singled out India for the harshest tariff rate of 50 per cent, compared to 30 per cent for China and 15 per cent for Turkey, despite all three countries importing Russian oil. Brent oil prices dropped to $66.25 per barrel in Asian trade on Monday morning, continuing last week's significant declines as traders anticipated upcoming talks between Russia and the US will ease the Ukraine conflict. China released soft inflation data and economic indicators in July, indicating that the economy was recovering slowly, leaving oil markets largely pessimistic about future demand. FII selling persisted during the week in Indian equity markets, indicating broader risk aversion in emerging markets. However, ongoing purchases by DIIs helped mitigate losses.
The Hindu
6 minutes ago
- The Hindu
Intel CEO to visit White House on Monday: Report
Intel CEO Lip-Bu Tan is set to visit the White House on Monday after U.S. President Donald Trump called for his removal last week, the Wall Street Journal reported on Sunday, citing people familiar with the matter. Reuters could not immediately confirm the report. Intel and the White House did not immediately respond to requests for comment. Tan is expected to have a extensive conversation with Trump while looking to explain his personal and professional background, the report said, adding that he could propose ways Intel and the U.S. government could work together, the report added. Tan hopes to win Trump's approval by showing his commitment to the U.S. and guaranteeing the importance of keeping Intel's manufacturing capabilities as a national security issue, the report added. Last week, Trump demanded the immediate resignation of Tan, calling him "highly conflicted" due to his ties to Chinese firms and raising doubts about plans to turn around the struggling American chip icon. Tan said he shared the president's commitment to advancing U.S. national and economic security.
&w=3840&q=100)
Business Standard
6 minutes ago
- Business Standard
US green card age rule change: How it may hit children, H-1B visa holders
A recent change by the US Citizenship and Immigration Services (USCIS) will narrow the eligibility for children to remain on their parent's green card application, affecting thousands of immigrant families — including many on H-1B visas. From August 15, 2025, adjustment of status applications will be assessed under a stricter standard. Children turning 21 before approval will lose eligibility unless they qualify under the revised Child Status Protection Act (CSPA) calculation. How the rule has changed Under the Biden administration's February 2023 policy, USCIS used the more generous 'dates for filing' chart to decide if a child's age could be frozen under the CSPA, giving families extra time. From August 15, the agency will revert to the 'final action dates' chart — a less favourable benchmark that often shortens the protection window. 'The Immigration and Nationality Act defines a child as a person who is both unmarried and under 21 years old,' USCIS explained in its announcement. 'If someone applies for lawful permanent resident status as a child but turns 21 before being approved, that person can no longer be considered a child for immigration purposes. This is commonly referred to as 'ageing out'.' USCIS said Congress had created the CSPA in 2002 to address backlogs causing children to lose eligibility before their case was decided. The law allows an age calculation — the 'CSPA age' — that can keep a child under 21 for immigration purposes even after their actual birthday, but only if they remain unmarried. Why this matters for Indian families The change will hit the Indian diaspora particularly hard. India has one of the world's longest waits for an employment-based green card, with backlogs stretching into decades. A March 2023 analysis by David J. Bier, director of immigration studies at the Cato Institute, found a queue of 1.07 million Indians in the EB-2 and EB-3 categories. Bier projected that nearly 134,000 children in these families could age out before a green card becomes available — a figure that could now rise under the revised calculation. How the CSPA works For employment-based green card cases, several conditions must be met for a child to remain eligible: • The I-140 petition must be approved • The I-485 adjustment of status application must be filed • The priority date must be current • The child must be under 21 after subtracting the time the I-140 was pending For example, if an I-140 was pending for one year, that year is deducted from the child's age. The same principle applies in family-based cases using the I-130 petition. Impact of the new calculation 'This means that some children, even with a filed I-485, could lose eligibility if they turn 21 before the final action date is current,' said Reddy Neumann, a US-based immigration attorney. 'This change essentially reverts the policy to how it was before the more flexible approach in recent years.' Neumann added, 'Once a child's age is locked in under CSPA, no further worry is needed. But for those not yet protected, timing is crucial. While it's possible to file the I-485 with a pending I-140, the age lock-in only occurs when the I-140 is approved and the final action date is current.' Doug Rand, a former Department of Homeland Security official who worked on the 2023 policy, called the change unnecessary. 'It's such a petty and obnoxious thing to do. Of course, the Trump administration is causing fear and heartbreak at a massive scale, across the immigration system, and this may seem like a small thing in the grand scheme,' he said. What should applicants do? Attorneys may consider strategies such as adjusting premium processing timelines to maximise the pending period of an I-140, which can benefit age calculations. 'This is a case-by-case decision that should be carefully planned with legal advice,' said Neuman
