MUMBAI- The rupee is expected to stay under pressure this week as the looming risk of trade tariffs support the dollar with remarks from the Federal Reserve chair and US inflation data in focus for the local currency and government bonds.
The rupee closed at 87.4250 on Friday, down nearly 1 percent for the week, its worst weekly decline since December 2022.
Concerns around a global trade war, foreign portfolio outflows and expectations of a domestic interest rate cut pushed the rupee to its lifetime low of 87.5825 last week.
The Reserve Bank of India cut rates for the first time in nearly five years on Friday.
Meanwhile, US President Donald Trump said on Friday that he plans to announce reciprocal tariffs on many countries early this week but did not specify which countries. Indian Prime Minister Narendra Modi will visit the US on Wednesday for talks with President Trump.
Trump’s comments helped boost the dollar alongside data on Friday that showed the US unemployment rate declined to 4 percent, reinforcing the view that the Fed does need to rush to cut interest rates.
“Trade policy uncertainties and the solid labor market conditions will help limit an extension of the dollar selling,” that emerged last week, MUFG Bank said in a note.
Traders will also keep an eye on remarks from Federal Reserve Chair Jerome Powell on Tuesday, followed by the US consumer price inflation data on Wednesday, both of which will influence the dollar’s trajectory.
Separately, the benchmark 10-year bond yield ended at 6.7043 percent on Friday, up 5 basis points. Traders expect the yield to trade in the 6.65 percent-6.75 percent range this week.
