MUMBAI: The Indian rupee is expected to open marginally weaker on Tuesday, pressured by the dip in the yuan amid a cut in China’s key lending rates.
The 1-month non-deliverable forward indicated that the rupee will open at 85.44-85.46 to the U.S. dollar compared with 85.40 in the previous session.
Following the volatility triggered by India-Pakistan tensions, the Indian rupee has settled into a relatively narrow range. On Monday, the currency traded within a 25-paisa band.
Throughout May, the rupee has moved in a wider range of 83.77 to 85.84, and now appears to have stabilised within an 85 to 86 band, a currency trader at a bank said.
“A breakout on either side of 85 to 86 seems unlikely in the near term,” a currency trader at a bank said.
A move past 86 would likely require a renewed decline in the Chinese yuan, which currently appears improbable, the trader said, adding a break below 85 would need a positive surprise on the U.S.-India trade front.
Foreign investor interest in Indian equities and exporter hedging around the 85.50–85.80 level are helping support the rupee, while higher-than-usual dollar demand for immediate payments is weighing, bankers said.
China cuts rates, Yuan slips
The offshore Chinese yuan weakened to 7.2250 against the U.S. dollar, dragging down other Asian currencies. China cut key lending rates on Tuesday for the first time since October — a move that was widely anticipated.
The U.S.-China agreement to reduce reciprocal tariffs has lifted sentiment around the yuan, which is up 0.6% so far this month. In contrast, the Indian rupee has underperformed, declining 1.1%.
Meanwhile, the 10-year U.S. Treasury yield have returned to levels seen before Moody’s downgrade of the U.S. credit rating.
