USD/INR: Indian Rupee at Risk amid Trade War Escalation

Emerging market currencies like Indian Rupee is at risk amid trade war escalations. On the currency market, the Rupee appreciated by 10 paise settling at 71.53 against the US dollar. The move was motivated by the broad-base dollar weakness.

During the early Asia trading hours and after the London open, the USD/INR exchange rate was seen quoted within a range of 71. — 71.42, as Rupee gained more traction.

Monday’s trading session saw the USD/INR exchange rate fluctuate within the range of 71.75 — 71.48. The dollar index, which gauges the greenback’s strength against a basket of major currencies tumbled during the first trading day of the week and settled at 97.89, registering a -0.40% loss.

In other news, the US President Donald Trump slapped new tariffs on steel and aluminum imports from Brazil and Argentina.  Trump defended its move to impose tariffs due to “massive devaluation of their currencies,” which makes it harder for the US exports to compete. The Trump administration imposed tariffs in 2018 of 10% on aluminum and 25% on steel, but they were lifted soon after they got into effect.

The US Commerce Secretary Wilbur Ross warned that if there is no trade deal with China, the US resident will slap more tariffs.

“If nothing happens between now and then, the president has made quite clear he’ll put the tariffs in – the increased tariffs,” Ross said.

According to state sources, china is expected to announce retaliatory sanctions on the US, after the US President signed into law the Hong Kong bill. Anonymous sources revealed that China will release a list of US companies and politicians to restrict their entry to China.

Later this week the Reserve Bank of India RBI is expected to deliver another rate cut at its December policy meeting to support the lackluster economic activity. India’s Growth Domestic Product growth rate tumbles to a modest 4.5% in the third quarter of 2019, the worst reading since 2013.

The domestic benchmark equity index NIFTY 50 gaped higher during the first trading day of the week, but sold off and settled at 12048. During early Asia trading hours, NIFTY 50 tumbled and was seen trading at a low of 11969. The Indian 10-year government bond yield closed at 6.49 versus 6.48 previous closing prices.

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