Trade deal developments to drive Indian rupee; bond yields to track Treasuries
MUMBAI (Reuters) -Indian rupee traders will monitor trade talks with the U.S. this week, ahead of a July 9 deadline for making deals with the world's largest economy, while government bond yields will likely be range-bound with focus on movement in Treasury yields.
The rupee closed at 85.3925 on Friday, with little change over the week.
Traders reckon that a U.S.-India trade agreement would be a boost for the South Asian country, but it is unlikely to spark a sharp rally.
"If the treaty happens, the rupee may see some more upside while the RBI (Reserve Bank of India) may not be very comfortable with a fast appreciation of the rupee," said Anil Bhansali, head of treasury at Finrex Treasury Advisor. He pegged the near-term resistance for the local currency at around 85.
The rupee's very near-term implied volatility has remained muted despite the uncertainty, reflecting market expectations of a range-bound movement.
The U.S. is close to clinching several trade deals ahead of the July 9 deadline, Treasury Secretary Scott Bessent said on Sunday.
Meanwhile, data released on Friday showed that India's foreign exchange reserves rose to $702.8 billion, as of June 27, in touching distance of an all-time high hit last year.
The dollar continues to trend downwards, with scaled-back wagers on rate cuts by the Fed prompting only fleeting gains last week.
U.S. consumer inflation data due on Tuesday, followed by retail sales data on Thursday, will also be in focus to gauge the future path of benchmark policy rates.
Meanwhile, India's 10-year benchmark 6.33% 2035 bond yield ended at 6.2947% on Friday, barely changed for the week. Traders expect it to move in a range of 6.28% to 6.33% this week.
Bond market participants would remain focused on the movement in U.S. Treasury yields this week, especially after strong jobs data reduced hopes for Fed rate cuts.
"Tariffs and other geopolitical uncertainties may contribute to market volatility in the short term, but taking into consideration the modest growth expectations, with the current trend of inflation, there may be scope for monetary easing," said Parijat Agrawal, head of fixed income at Union Asset Management.
Traders will also watch whether the recent surge in foreign inflows into Indian bonds continues, with investors having net bought over $1 billion of government bonds last week.
Also on the radar is the RBI's next move, after it did not raise the quantum of liquidity withdrawal from the banking system despite surplus hitting a three-year high on Friday.
The central bank's gradual approach for variable rate reverse repos (VRRRs) is likely to keep the overnight interbank lending rates between the policy repo rate and the floor of the corridor, allowing some policy transmission, traders said.
KEY EVENTS:
** U.S. initial weekly jobless claims for week to June 30 - July 10, Thursday (6:00 p.m. IST)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
2 hours ago
- Yahoo
New U.S.-China Trade Framework Resets Rare Earth Logjam
Via Metal Miner The Rare Earths MMI (Monthly Metals Index) moved sideways, rising a modest 0.66%. Meanwhile, prices for rare earths may experience short-term stabilization in the upcoming months, primarily due to President Trump reaching an agreement with China to ease restrictions on critical mineral exports. In a recent developments, Beijing and Washington agreed to lift China's export curbs on rare earth minerals. The June 27 agreement will allow shipments of Chinese rare earth magnets and other critical minerals to resume flowing to the U.S. after months of disruption. Under the agreement, China's commerce ministry stated that it will 'review and approve eligible export applications for controlled items' in accordance with Chinese law, and the U.S. will reciprocate by rolling back several restrictive measures. In practical terms, this means that the rare earths powering everything from aircraft avionics to consumer electronics should become more readily available to American buyers. U.S. Treasury Secretary Scott Bessent said negotiations following a Trump–Xi call and two rounds of talks have ironed out the remaining issues. He stated, 'I am confident now that, as agreed, the magnets will flow'. According to Reuters, the restrictions acted as a near-total freeze on exports, upending supply chains for industries from automotive and aerospace to electronics and defense. In mid-May, Washington and Beijing agreed to a 90-day tariff truce, but China initially failed to approve the pending export licenses as promised. The bureaucratic slowdown proved costly. U.S. firms submitted hundreds of license applications after April 2, but only about 25% had been approved by June. That shortfall forced some U.S. plants to idle. Ford, for example, shut its Chicago Explorer line for a week in May due to magnet shortages. The new trade framework effectively resets that logjam, and supply chains are now expected to move again. Meanwhile, Western magnet makers have been racing to fill the gap. Neo Performance Materials, a Canadian firm, only began output at its Narva, Estonia factory in May. However, its CEO says 'the phone is ringing off the hook' as customers scramble to secure supply. Auto and tech companies have even become willing to pay steep premiums for magnets from outside China. Indeed, Reuters reports that buyers now pay roughly $10–$30 per kilogram more than usual for magnets made outside China. For now, U.S. manufacturers can breathe easier knowing the immediate supply choke points for rare earths are easing. However, they are still advised to maintain cushion stocks. Automakers have already begun tapping alternative sources for these vital minerals in order to manufacture EVs. Electronics and defense companies similarly depended on rare-earth alloys and permanent magnets for their respective products. For example, Chicago-based Ford has an active consumer electronics unit. Auto plants and tech factories alike are now sharing the stress of critical mineral shortage. Many sectors, besides automotive and electronic companies, will also feel the benefit from the unlocking of China's rare earth restrictions, including wind-turbine manufacturers, robotics firms and appliance makers. With new exports forthcoming, some production pauses should be reversed. Still, U.S. buyers are watching closely. 'We're going to have deal after deal after deal,' Treasury Secretary Lutnick has quipped, meaning each step must be monitored in case policies shift again. In the immediate term (July–August 2025), market watchers anticipate a modest improvement in supply. Some temporary backlogs of raw materials should clear, helping to stabilize prices that spiked during the restrictions. However, China's Commerce Ministry emphasized that it has not scrapped its export permit requirement. Rather, it simply agreed to process applications 'in accordance with the law'. In practice, future shipments could still be paused if geopolitical tensions flare. MetalMiner analysis highlights that the U.S.–China truce expires in August, making the next 60 days a critical test. For procurement executives, the message is clear: expect a temporary calm but plan for jumps. As CSIS analysts warn, the agreement may resume heavy-rare-earth flows for now, but it is likely only a temporary reprieve. By Jennifer Kary More Top Reads From this article on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
New York Times
2 hours ago
- New York Times
As Renewed U.S. Tariffs Loom, Emerging Economies Turn to One Another
America's trading partners are bracing for President Trump to impose new tariffs soon on everything from children's toys to soybeans. Yet, instead of rushing to strike trade deals with the United States, the world's largest developing economies have other plans. At a two-day gathering in Rio de Janeiro, members of the BRICS group that includes Brazil, Russia, India, China, South Africa and other nations, vowed to deepen ties and mulled ways they could cut red tape to make it easier to trade with one another. Without naming the United States or Mr. Trump, the alliance criticized barriers to international trade and defended the right of its member countries, which represent more than 40 percent of the world's gross domestic product, to retaliate against what officials portrayed as unfair tariffs. 'We voice serious concerns about the rise of unilateral tariff and non-tariff measures, which distort trade,' the group said in a joint statement, calling for 'fair' and 'inclusive' trading rules, in line with international norms set by the World Trade Organization. The effort to increase trade within the BRICS group highlights how Mr. Trump's tariffs are redrawing global economic relations and pushing America's trading partners to other markets. It also comes as a 90-day pause on tariffs that Mr. Trump imposed on most of America's trade partners is set to expire on Wednesday. Despite ambitious plans to broker dozens of trade deals benefiting the United States, Mr. Trump has so far struck only two agreements, with Britain and Vietnam, though administration officials have said he will announce more trade deals this week. Want all of The Times? Subscribe.
Yahoo
4 hours ago
- Yahoo
Trump trade advisor bashes Tim Cook for Silicon Valley's 'longest-running soap opera'
Trump trade advisor Peter Navarro bashed Tim Cook for not moving manufacturing out of China. Navarro said that it's "inconceivable" that Apple couldn't make iPhones elsewhere. Apple has ramped up production in India recently, but that hasn't appeased the president's anger. White House trade advisor Peter Navarro gave Apple CEO Tim Cook a new, somewhat unexpected title in a recent interview: soap opera star. Navarro, who has advised President Donald Trump since his first term is a staunch tariff advocate, said on CNBC's "Squawk on the Street" that Apple CEO Tim Cook isn't doing enough to move manufacturing out of China. "Going back to the first trump term, Tim Cook has continually asked for more time in order to move his factories out of China," Navarro said. "I mean it's the longest-running soap opera in Silicon Valley. My problem with Tim Cook is he never takes the steps to actually do that." He added that it's "inconceivable" that Apple couldn't move manufacturing. Representatives for the White House and Apple did not immediately respond to a request for comment from BI. Apple has historically depended on a sprawling supply chain in China to manufacture and ship its products to America, though the company has taken steps to diversify its supply chain amid the Trump administration's trade war with China. The White House delayed tariffs again this weekend; now, the Liberation Day tariffs are set to take effect on August 1. In February, Apple committed to investing $500 billion in US projects throughout the next four years. An analyst previously told BI that a made-in-America iPhone could cost $3,500, and some think it's impossible for the company to shift manufacturing to the US at all. Apple is ramping up iPhone production in India, which Cook talked about during a May earnings call. "For the June quarter, we do expect the majority of iPhones sold in the US will have India as their country of origin, and Vietnam to be the country of origin for almost all iPad, Mac, Apple Watch, and AirPods products also sold in the US," Cook said. In May, Trump threatened a 25% tariff on iPhones that aren't made in the US. He's also criticized Apple's investment in India, saying in May that he has a "little problem" with Cook because of the effort there rather than in the US. It's generally been a tough year for Apple stock, given lagging iPhone sales and a lackluster showing in the AI race. Navarro was also asked about his public spat with another tech bigwig during his interview: Tesla CEO and former White House darling Elon Musk. He generally brushed off the question, though, and instead spoke about the spending bill that Trump recently signed into law. Over the weekend, Musk announced he is forming a new political party after publicly criticizing the bill. Read the original article on Business Insider
