Indian rupee slips as Trump re-election odds rise

The Indian rupee fell on Monday, tracking losses in Asian currencies and pressured by a decline in the Chinese yuan. The rupee closed at 83.5925 against the US dollar, down from 83.5350 in the previous session.

The dollar index fell by 0.2 per cent to 104, impacting the rupee. The rupee faced challenges from a weakening yuan and risk aversion due to increasing chances of a Donald Trump re-election in the US.

The Korean won was the worst performer among major Asian currencies, dropping by 0.5 per cent.

China’s slowing economy, reflected in its weakest growth rate in five quarters, led to the yuan’s depreciation. The rupee was under pressure due to a weaker yuan and regular importer dollar demand, according to a forex trader.

Nevertheless, dollar sales from foreign and state-run banks towards the end of the session helped mitigate the rupee’s decline.

The recent assassination attempt on former US President Trump is seen as potentially boosting his chances of winning the upcoming presidential election.

This prospect has historically pushed long-dated Treasury yields and the dollar higher. The 10-year US Treasury yield was up slightly at 4.20 per cent.

However, expectations of a Federal Reserve rate cut in September remain high, exceeding 95 per cent according to CME’s FedWatch tool. This could limit further gains for the dollar.

On a brighter note, India’s trade deficit narrowed to $20.98 billion in June compared to $23.78 billion in May. Investors now await remarks from Fed Chair Powell later today, hoping for clues on the future path of US interest rates.

Attribution: Reuters