INDIA RUPEE-Muted open for rupee despite Asia cheer on US-Japan trade pact

By Nimesh Vora

MUMBAI, July 23 (Reuters) - The Indian rupee is expected to open largely unchanged on Wednesday, shrugging off the modest boost to its Asian peers after a U.S.-Japan trade deal fuelled hopes that Washington may strike similar agreements with other countries.

The 1-month non-deliverable forward indicated the rupee INR=IN will open in the 86.35-86.38 range versus the U.S. dollar, compared with 86.3675 on Tuesday.

The rupee will "receive mild help" at open on account of Asia, a currency trader at a Mumbai-based bank said.

"However, dips (on USD/INR) have been bought into quickly and the odds favour a repeat of that," he said, adding, "I will definitely not be looking to sell USD/INR currently."

On Tuesday, the rupee briefly recovered to 86.22 before slipping to a one-month low of 86.4125 on likely outflows and hedging. The currency has declined in seven of the last eight sessions, dropping 0.7% so far this month.

Shares in Tokyo jumped and U.S. equity futures rose after U.S. President Donald Trump announced a trade deal with Japan, lowering proposed tariffs on Japanese imports to 15% from 25%. The agreement lifted the yen and other Asian currencies.

The U.S.-Japan deal comes just days ahead of the August 1 deadline set by Trump for finalising trade agreements or face steep tariffs.

The scheduled rollout of the reciprocal tariff on 1 August "looms large", MUFG Bank said in a note.

"In the absence of new US trade deals, there's a risk that tariff levels could revert to the steeper rates announced during Liberation Day in April. This uncertainty is weighing on the U.S. dollar."

On Tuesday, Trump announced a new 19% tariff on goods from the Philippines, just below the 20% rate he had previously threatened to impose.

India, meanwhile, has yet to reach a trade agreement with the United States and the prospects of an interim trade deal before the August 1 deadline have dimmed.

KEY INDICATORS:

** One-month non-deliverable rupee INRNDFOR= forward at 86.40; onshore one-month forward premium at 11.75 paise

** Dollar index =USD at 97.48

** Brent crude futures LCOc1 up 0.4% to $68.8 per barrel

** Ten-year U.S. note yield at 4.36%

** As per NSDL data, foreign investors sold a net $125.8 million worth of Indian shares on July 21

** NSDL data shows foreign investors sold a net $8.9 million worth of Indian bonds on July 21