Clouds gather over rupee on tariff worries, persistent outflows
The 1-month non-deliverable forward indicated the rupee will open in the 87.65-87.70 range versus the U.S. dollar, compared with 87.5950 in the previous session.
The rupee declined about 2% in July, with U.S. President Donald Trump's threat of a 25% levy on Indian goods, alongside an unspecified penalty, pushing it closer to its all-time low of 87.95.
Economists estimate that the 25% tariff announced could shave off the South Asian nation's growth in 2025-26 by up to 40 basis points, but analysts and investors also reckon that India may be able to achieve a lower rate via negotiations.
"India remains a strategic partner for the U.S. and stands to benefit from opening up its large market. We, therefore, believe there is a path forward and expect India will eventually secure a relatively favourable deal," analysts at BMI said in a note.
A tariff on pharmaceutical exports from India, if implemented, would have a more serious impact on India's growth, the note added.
Uncertainty on trade is also expected to be a near-term drag on foreign investors' outlook on Indian equities. Overseas investors net pulled out over $600 million from local stocks on Thursday, per provisional exchange data.
The 25% tariff may mark the beginning of protracted negotiation, but "India needs some positive news to grab foreign investors' interest as they have continued to dump Indian equities and North Asia, with its value, income and reform tilt is faring much more strongly," said Sat Dhura, portfolio manager at Janus Henderson Investors.
"It will take more than a trade announcement to reverse that," Dhura said.
Meanwhile, Asian currencies were down between 0.1% and 0.5% on the day, while slimmed hopes of a rate cut by the U.S. Federal Reserve in September helped the dollar cling to the 100 handle, its highest in about two months.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 87.77; onshore one-month forward premium at 13 paisa
** Dollar index at 100.09
** Brent crude futures down 0.1% at $71.6 per barrel
** Ten-year U.S. note yield at 4.38%
** As per NSDL data, foreign investors sold a net $18.6mln worth of Indian shares on Jul. 30
** NSDL data shows foreign investors bought a net $6mln worth of Indian bonds on Jul. 30
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
7 minutes ago
- The Independent
US tariffs put 30,000 South African jobs at risk, officials say
U.S. reciprocal tariffs have put an estimated 30,000 jobs at risk, South African authorities said Monday, four days before a 30% U.S. tariff on most imports from South Africa kicks in. South Africa was slapped with one of the highest tariff rates by its third-largest trading partner — after China and the EU — creating uncertainty for the future of some export industries and catapulting a scramble for new markets outside the U.S. Tariffs come into effect on Aug. 8. In an update on mitigation measures, a senior government official warned that an estimated 30,000 jobs were in jeopardy if the response to the higher tariffs was 'mismanaged'. 'We base this on the ongoing consultations that we have with all the sectors of the economy from automotive, agriculture and all the other sectors that are going to be impacted,' said Simphiwe Hamilton, director-general of the Department of Trade, Industry and Competition. South Africa is already grappling with stubbornly high unemployment rates. The official rate was 32,9% in the first quarter of 2025 according to StatsSA, the national statistical agency, while the youth unemployment rate increased from 44,6% in the fourth quarter of 2024 to 46,1% in the first quarter of 2025. In his weekly public letter on Monday, President Cyril Ramaphosa said that South Africa must adapt swiftly to the tariffs since they could have a big impact on the economy, the industries that rely heavily on exports to the U.S. and the workers they employ. 'As government, we have been engaging the United States to enhance mutually beneficial trade and investment relations. All channels of communication remain open to engage with the US,' he said. 'Our foremost priority is protecting our export industries. We will continue to engage the US in an attempt to preserve market access for our products.' President Donald Trump has been highly critical of the country's Black-led government over a new land law he claims discriminates against white people. Negotiations with the U.S. have been complicated and unprecedented, according to South Africa's ministers, who denied rumors that the lack of an ambassador in the U.S affected the result of the talks. The Trump administration expelled Ebrahim Rasool, South Africa's ambassador to Washington, in mid-March, accusing him of being a 'race-baiting politician' who hates Trump. International Relations Minister Ronald Lamola highlighted that even countries with ambassadors in the U.S. and allies of Washington had been hard hit with tariffs. However, Lamola confirmed that the process of appointing a replacement for Rasool was 'at an advanced stage'. The U.S. accounts for 7.5% of South Africa's global exports. However, several sectors, accounting for 35% of exports to the U.S., remain exempt from the tariffs. These include copper, pharmaceuticals, semiconductors, lumber products, certain critical minerals, stainless steel scrap and energy products remain exempted from the tariffs. The government has been scrambling to diversify South Africa's export markets, particularly by deepening intra-African trade. Countries across Asia and the Middle East, including the United Arab Emirates, Qatar, and Saudi Arabia have been touted as opportunities for high-growth markets. The government said it had made significant progress in opening vast new markets like China and Thailand, securing vital protocols for products like citrus. The government has set up an Export Support Desk to aid manufacturers and exporters in South Africa search for alternate markets. While welcoming the establishment of the Export Support Desk, an independent association representing some of South Africa's biggest and most well-known businesses called for a trade crisis committee to be established that brings together business leaders and government officials, including from the finance ministry. Business Leadership South Africa said such a committee would ensure fast, coordinated action to open new markets, provide financial support, and maintain employment. 'U.S. tariffs pose a severe threat to South Africa's manufacturing and farming sectors, particularly in the Eastern Cape. While businesses can eventually adapt, urgent temporary support is essential,' said BLSA in a statement.
Reuters
8 minutes ago
- Reuters
US could require up to $15,000 bonds for some tourist visas under new pilot program, notice says
WASHINGTON, Aug 4 (Reuters) - The U.S. could require up to $15,000 bonds for some tourist and business visas under a new pilot program launching in two weeks, a U.S. government notice said on Monday, an effort that aims to crack down on visitors who overstay their visas.
Reuters
8 minutes ago
- Reuters
Russia's Novokuibyshevsk oil refinery halted operations after drone attacks, sources say
MOSCOW, Aug 4 (Reuters) - Primary oil processing at Russia's Novokuibyshevsk refinery, which is operated by the Rosneft oil company, has been halted since August 2 following a Ukrainian drone attack last week, two industry sources said. That was the first time a major Russian refinery had been attacked by a drone since March 2025. It came after U.S. President Donald Trump last Monday set a 10-12-day deadline for Moscow to agree on a ceasefire with Kiev or face consequences, underscoring his frustration over the continuing 3-1/2-year-old conflict. U.S. special envoy Steve Witkoff is expected to travel to Russia this week after his current visit in Israel. The refining capacity of Novokuibyshevsk is 8.3 million metric tons of oil per year (or some 160,000 barrels per day). Rosneft did not respond immediately to a request for comment. According to the sources, the attack damaged the main primary oil refining unit CDU-11 at the Novokuibyshevsk refinery. The refinery has two primary units: CDU-11 with a capacity of 18,900 metric tons per day, and CDU-9 with a capacity of 4,700 tons per day. The refinery planned to stop CDU-9 for a major scheduled maintenance from August to early September. According to the sources, the Novokuibyshevsk oil refinery was recently processing about 18,000 tons of crude oil per day. Last year, the refinery processed 5.74 million tons of crude oil, produced 1.10 million tons of motor gasoline, 1.64 million tons of diesel fuel, and 1.27 million tons of fuel oil, according to industry sources.
