MUMBAI (Reuters) -The Indian rupee is poised to open higher on Monday after the Federal Chair Jerome Powell signalled a September rate cut, though looming U.S. tariff uncertainty may mean that the advance is unlikely to sustain, traders said.
The 1-month non-deliverable forward indicated the rupee will open in the 87.36 to 87.38 range versus the U.S. dollar, compared with 87.53 on Friday.
The rupee briefly rose past 87 last week before finishing near the lows.
A currency trader at a bank said he does not see that move past 87 materialising “again anytime soon”, with the risk that the steep U.S. tariffs will remain in place.
The possibility that the rupee will see an all-time low this week “is not negligible”, said a Mumbai-based trader at a private bank.
Indian goods face additional U.S. tariffs of up to 50% with effect from Wednesday. Washington has already imposed 25% duties on shipments from India, higher than those on several other major trading partners. The additional tariffs are being imposed for India’s purchase of Russian oil.
Rupee traders have been tracking developments from the Trump-Putin talks for signals on a potential Ukraine-Russia peace deal, which could reduce the likelihood of additional tariffs.
However, sentiment would be cautious after U.S. President Donald Trump on Friday warned he would impose sanctions on Russia within two weeks unless there is progress toward a settlement.
The dollar index dropped 0.9% on Friday to below 98 after Powell pointed to a possible rate cut at the central bank’s September meeting. Treasury yields dropped while U.S. equities rallied.
Market odds of a September cut rose, and investors increased the amount of cuts priced in for 2025.
“This was dovish than we in rates strategy thought he’d be. He did not object to a rate cut at all. He effectively chose to endorse the market discount for a rate-cutting phase ahead,” Padhraic Garvey, regional head of research – Americas, at ING Bank, said in a note.
** One-month non-deliverable rupee forward at 87.46; onshore one-month forward premium at 12 paise
** Brent crude futures up 0.1% at $67.8 per barrel
** Ten-year U.S. note yield at 4.27%; dropped 7 basis points on Friday
** As per NSDL data, foreign investors sold a net $64.7mln worth of Indian shares on Aug. 21
** NSDL data shows foreign investors sold a net $16.1mln worth of Indian bonds on Aug. 21
(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)
