Indian rupee to track dollar recovery, bond market focused on rate cut bets
The rupee closed at 86.1475 on Friday, down 0.4% on the week. It is expected to hover between 85.80 and 86.70 in the near-term with a slight weakening bias, according to traders.
After falling for five straight months, the dollar index is up 1.5% in July so far, as strong U.S. economic data and indications that tariffs have started pushing up prices lowered rate-cut expectations in the world's largest economy.
Remarks from Federal Reserve Chair Jerome Powell on Tuesday will be in focus, in light of the persistent criticism he has faced from U.S. President Donald Trump for not lowering interest rates.
The odds of a U.S. rate cut in September are around 53%, per CME's FedWatch tool.
India's ongoing trade negotiations with the U.S. will also be in focus alongside quarterly earnings reports from local companies, which have a bearing on foreign portfolio flows into equities.
Forex advisory firm IFA Global recommended that importers cover near-term liabilities around 86, while suggesting exporters hedge around 86.25.
Meanwhile, India's 10-year benchmark 6.33% 2035 bond yield , which settled last week at 6.3058%, is expected to move in a range of 6.28% to 6.33%. The yield could rise as New Delhi sells 300 billion rupees ($3.5 billion) of the benchmark on Friday.
Focus will be on the potential for rate cuts after India's retail inflation slipped to a more than six-year low in June. An expected further drop to a record low in July is prompting calls for another rate cut.
"With recent high frequency data disappointing and indicating the possibility of growth in India slowing down further...it makes sense to be involved in local currency bonds also on the potential for more support from the RBI further down the line," said Giulia Pellegrini, lead portfolio manager emerging market debt at AllianzGI.
Market participants would also track whether the Reserve Bank of India turns more aggressive in withdrawing liquidity after drawing out 2 trillion rupees from the banking system on Friday.
KEY EVENTS:
** India July HSBC manufacturing, services and composite Flash PMI - July 24, Thursday (10:30 a.m. IST)
U.S.
** June existing home sales - July 23, Wednesday (7:30 p.m. IST)
** Initial weekly jobless claims for week to July 14 - July 24, Thursday (6:00 p.m. IST)
** July S&P Global manufacturing, services and composite Flash PMI - July 24, Thursday (7:15 p.m. IST)
** June new home sales units - June 25, Wednesday (7:30 p.m. IST)
** June durable goods - June 26, Thursday (7:30 p.m. IST)
($1 = 86.1180 Indian rupees)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
3 minutes ago
- Reuters
KFC India operator Sapphire posts quarterly loss as expenses rise
July 23 (Reuters) - Sapphire Foods India ( opens new tab, which operates Pizza Hut and KFC restaurants in the country, reported a quarterly loss on Wednesday, as expenses rose and fast-food restaurant chains faced stiff competition from local cafes and online kitchens. The restaurant operator posted a net loss of 18 million rupees ($208,345.39) for the first quarter ended June 30, compared to a profit of 85.2 million rupees a year earlier, according to a regulatory filing. Total expenses rose 10.4%. Popular fast-food chains including Pizza Hut and KFC have been struggling to maintain same-store sales growth in India, as consumers wary of high cost of living cut back on dining out and ordering in. They are turning to heavy discounting to draw more diners, with KFC pushing its nine-piece fried chicken for 299 rupees ($3.50) in a deal that it called "epic savers" and Pizza Hut offering a free Pepsi with select pizzas during the quarter. Still, the efforts fell short at Sapphire Foods, with same-store sales flat at KFC and down 8% at Pizza Hut in India. However, its move to open dozens of news stores in the 12 months to June-end helped Sapphire Foods, one of the two Yum Brands (YUM.N), opens new tab franchisees in India, push its revenue higher by 8.1% to 7.77 billion rupees. ($1 = 86.3950 Indian rupees)
The Independent
4 minutes ago
- The Independent
Flurry of trade deals offers relief for some Asian countries, while others wait
Donald Trump has announced trade deals with Japan and a handful of other Asian countries that will relieve some pressure on companies and consumers from sharply higher tariffs on their exports to the United States. A deal with China is under negotiation, with U.S. Treasury Secretary Scott Bessent saying an Aug. 12 deadline might be postponed again to allow more time for talks. Steep tariffs on U.S. imports of steel and aluminum remain, however, and many other countries, including South Korea and Thailand, have yet to clinch agreements. Overall, economists say the tariffs inevitably will dent growth in Asia and the world. The deals reached so far, ahead of Trump's Aug. 1 deadline Trump and Japanese Prime Minister Shigeru Ishiba announced a deal Wednesday that will impose 15% tariffs on U.S. imports from Japan, down from Trump's proposed 25% 'reciprocal' tariffs. It was a huge relief for automakers like Toyota Motor Corp. and Honda, whose shares jumped by double digits in Tokyo. Trump also announced trade deals with the Philippines and Indonesia. After meeting with Philippine President Ferdinand Marcos, Jr., Trump said the import tax on products from his country would be subject to a 19% tariff, down just 1% from the earlier threat of a 20% tariff. Indonesia also will face a 19% tariff, down from the 32% rate Trump had recently said would apply, and it committed to eliminating nearly all of its trade barriers for imports of American goods. Earlier, Trump announced that Vietnam's exports would face a 20% tariff, with double that rate for goods transshipped from China, though there has been no formal announcement. Talks with China may be extended Negotiations with China are subject to an Aug. 12 deadline, but it's likely to be extended, Bessent told Fox Business on Tuesday. He said the two sides were due to hold another round of talks, this time in Sweden, early next week. Meanwhile, Trump said a trip to China may happen soon, hinting at efforts to stabilize U.S.-China trade relations. A preliminary agreement announced in June paved the way for China to lift some restrictions on its exports of rare earths, minerals critical for high technology and other manufacturing. In May, the U.S. agreed to drop Trump's 145% tariff rate on Chinese goods to 30% for 90 days, while China agreed to lower its 125% rate on U.S. goods to 10%. The reprieve allowed companies more time to rush to try to beat the potentially higher tariffs, giving a boost to Chinese exports and alleviating some of the pressure on its manufacturing sector. But prolonged uncertainty over what Trump might do has left companies wary about committing to further investment in China. No deals yet for South Korea and other Asian countries Pressure is mounting on some countries in Asia and elsewhere as the Aug. 1 deadline for striking deals approaches. Trump sent letters, posted on Truth Social, outlining higher tariffs some countries will face if they fail to reach agreements. He said they'd face even higher tariffs if they retaliate by raising their own import duties. South Korea's is set at 25%. Imports from Myanmar and Laos would be taxed at 40%, Cambodia and Thailand at 36%, Serbia and Bangladesh at 35%, South Africa and Bosnia and Herzegovina at 30% and Kazakhstan, Malaysia and Tunisia at 25%. Nearly every country has faced a minimum 10% levy on goods entering the U.S. since April, on top of other sectoral levies. Economists expect tariffs to sap growth even with trade deals Even after Trump has pulled back from the harshest of his threatened tariffs, the onslaught of uncertainty and higher costs for both manufacturers and consumers has raised risks for the regional and global economy. Economists have been downgrading their estimates for growth in 2025 and beyond. The Asian Development Bank said Wednesday it had cut its growth estimate for economies in developing Asia and the Pacific to 4.7% in 2025 and 4.6% in 2026, down 0.2 percentage points and 0.1 percentage points. The outlook for the region could be further dimmed by an escalation of tariffs and trade friction, it said. 'Other risks include conflicts and geopolitical tensions that could disrupt global supply chains and raise energy prices,' as well as a deterioration in China's ailing property market. Economists at AMRO were less optimistic, expecting growth for Southeast Asia and other major economies in Asia at 3.8% in 2025 and 3.6% next year. While countries in the region have moved to protect their economies from Trump's trade shock, they face significant uncertainties, said AMRO's chief economist, Dong He. 'Uneven progress in tariff negotiations and the potential expansion of tariffs to additional products could further disrupt trade activities and weigh on growth for the region,' he said.
Reuters
4 minutes ago
- Reuters
China's public security ministry says it will join regulatory tightening over assisted driving
BEIJING, July 23 (Reuters) - China's public security ministry on Wednesday said it will cooperate with the industry ministry and other governing bodies to tighten regulation related to assisted driving systems. Authorities will urge automakers to carry out driving assistance tests and verification, and clarify boundaries of assisted driving systems and security responses, Wang Qiang, an official with the public security ministry, told a press conference.
