INDIA RUPEE-US-China trade whiplash, choppy risk, bumpy dollar to test rupee
By Nimesh Vora
MUMBAI, Oct 13 (Reuters) - The Indian rupee is likely to open flat to marginally higher on Monday, with U.S. President Donald Trump's swings between tariff threats and softer China tones spurring volatility in risk sentiment and the dollar.
The 1-month non-deliverable forward indicated the rupee INR=IN will open in the 88.66-88.68 range versus the U.S. dollar, after settling at 88.6850 on Friday.
Trump appeared to have reignited the trade war with Beijing on Friday, announcing additional 100% levies on China's U.S.-bound exports and new export controls on "any and all critical software" effective November 1.
However, he struck a more conciliatory tone over the weekend, saying everything would be good and that the U.S. did not want to "hurt" China.
Beijing on Sunday said its restrictions on rare earth exports were a reaction to U.S. aggression, while choosing not to impose new tariffs on American goods.
U.S. equity futures rose on Monday after Trump's soft remarks on China, recovering from Friday's selloff. Futures indicated the S&P 500 Index would regain about half of its 2.7% drop from Friday.
Volatility is likely to high in the near-term, with assets priced for perfection leaving room for both realised and implied volatility to pick up from current lows, MUFG Bank said in a note.
The dollar index mirrored the choppy price action, last hovering just below 99. Asian currencies were mixed with the offshore Chinese yuan at near 7.1350 to the U.S. dollar.
"With all this U.S.-China chatter, I don't see (dollar/rupee) going anywhere big," said a trader at a state-run bank.
"The RBI's holding the top well, and dips are bought back quickly."
The Reserve Bank of India has been resolutely defending the 88.80 level on the dollar/rupee pair, keeping volatility muted. Over the past two weeks, the calm price action has reminded traders of the days of the RBI's tight grip on the currency.
KEY INDICATORS:
** One-month non-deliverable rupee INRNDFOR= forward at 88.88; onshore one-month forward premium at 12.75 paise
** Dollar index =USD at 98.92
** Brent crude futures LCOc1 up 1.6% at $63.7 per barrel
** Ten-year U.S. note yield at 4.06%
** As per NSDL data, foreign investors bought a net $271mln worth of Indian shares on Oct. 9
** NSDL data shows foreign investors sold a net $24.3mln worth of Indian bonds on Oct. 9
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