INDIA RUPEE-Rupee pares opening lift on hedging flows, weak undertone

By Nimesh Vora

MUMBAI, Aug 11 (Reuters) - The Indian rupee gave up part of its opening advance on Monday, pressured by hedging demand from corporates, while the broader bias for the currency remained weak amid U.S. tariff concerns.

The local unit, which opened at 87.5050, failed to extend gains, with private sector banks stepping in to buy dollars, mostly for importer clients.

The currency was quoted at 87.5925 to the dollar at 11.16 a.m. IST, compared with the close of 87.66 on Friday.

"The odds were always in favour of a dip in USD/INR at the open to be short-lived. The macro backdrop, flows and sentiment all favour upside (on USD/INR),” a currency dealer at a bank said.

"The sense is it (USD/INR) is still a long. However, it's a patience trade."

U.S. President Donald Trump’s recent imposition of steeper-than-expected tariffs on Indian goods, along with additional levies for purchases of Russian oil, has hurt the rupee’s near-term outlook.

Analysts have warned that the tariffs — among the steepest the U.S. has imposed on trading partners — could, if sustained, weigh on exports and hurt capital flows into India.

An important uncertainty for USD/INR is the potential for a hit to demand for India's exports because of higher tariffs, or a negative supply shock through higher global oil prices if Russia oil gets taken off markets, MUFG Bank said in a note.

The Reserve Bank of India is expected to continue its role as a key stabilising force in the currency market, much like it has in previous episodes of external stress, analysts say.

The central bank has been active in both the non-deliverable forward and onshore spot markets over the past two weeks, aiming to temper the rupee’s reaction to tariff risk.