MUMBAI: The Indian rupee is poised to open marginally higher on Tuesday as the US dollar faces headwinds from renewed trade policy ambiguity and with risk sentiment on the mend.
The 1-month non-deliverable forward indicated that the rupee will open at 85.96-85.98 per dollar compared with its close of 86.04 on Friday.
The Indian markets were closed on Monday for a local holiday.
The rupee slid nearly 1% last week, primarily hurt by increased hedging activity from importers and persistent equity outflows.
“Last week’s price action has likely set a floor for the dollar/rupee pair, at least for the time being,” said a currency trader at a bank.
He noted that the 85.50-86.00 range will likely draw good demand from importers looking to hedge their dollar payables.
The dollar index (DXY) remained below the 100 level amid the flip-flop on US tariff policies. Over the weekend, the US removed smartphones and other electronics from its tariffs on China.
However, President Donald Trump’s comments suggested the reprieve will likely be short-lived, leaving the markets uncertain about the long-term direction of trade tensions.
This uncertainty has piled pressure on the US currency, with the dollar index down more than 4% over a month.
In addition, expectations are rising that the Federal Reserve may be forced to lower interest rates more than previously anticipated, further weighing on the dollar.
US Fed Governor Christopher Waller said on Monday the US tariff policies are a major shock to the economy that could lead the Fed to cut rates to head off a recession even if inflation remains high.
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