INDIA RUPEE-Rupee to dip on US tariff woes, RBI rate-cut bets; Fed's decision awaited
By Nimesh Vora
MUMBAI, Jan 29 (Reuters) - The Indian rupee is poised to open lower on Wednesday, weighed down by renewed worries over U.S. tariffs and increased odds that the Reserve Bank of India would cut interest rates next week.
The 1-month non-deliverable forward indicated that the rupee INR=IN will open at 86.56-86.58 to the U.S. dollar, compared with 86.5225 in the previous session.
The dollar index =USD inched up to near 108 in the Asia trading hours, after U.S. President Donald Trump's comments brought back the focus on tariffs. Trump's latest tariff threats came a day after the U.S. and Colombia pulled back from the brink of a trade war.
The offshore Chinese yuan CNH= dipped to 7.2740 to the U.S. dollar.
The rupee had managed to strengthen past 86.20 on Friday.
The relief rally for the rupee "was expectedly cut short", a currency trader at a bank said.
"You can point to Trump's comments or the RBI rate cut. However, the main point here is that it (the rupee) is in a dogged downtrend."
The RBI on Monday announced a host of measures to inject liquidity into the banking system, including dollar/rupee swaps, which analysts said may set it up for a rate cut next week.
A rate cut by the RBI will be an added headwind for the rupee that is already dealing with equity outflows and uncertainties on the U.S. policy front, traders said.
FED DECISION
The Federal Reserve is widely expected to hold its policy rate later in the day, after having signalled a slowdown in the pace of rate cuts.
"What we will be watching for is whether the January meeting is a skip or the beginning of an extended pause," ANZ Bank said in a note.
KEY INDICATORS:
** One-month non-deliverable rupee INRNDFOR= forward at 86.78; onshore one-month forward premium at 17.75 paise
** Dollar index =USD at 107.94
** Brent crude futures LCOc1 % at $77.5 per barrel
** Ten-year U.S. note yield at 4.52%
** As per NSDL data, foreign investors sold a net $522.4mln worth of Indian shares on Jan. 27
** NSDL data shows foreign investors bought a net $43.9mln worth of Indian bonds on Jan. 27
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