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Rupee on the Edge: How China’s Yuan Shook Up Asian Markets

Updated: May 06, 2025 10:00

Image Source: Investing.com
The Indian rupee will open softer on Tuesday, following a steep fall in the Chinese yuan and general Asian currency weakness. This follows weak Chinese economic data, a change in the yuan's central bank reference rate, and renewed trade tensions that curbed regional currencies and market sentiment.
 
Rupee Outlook
  • The rupee is likely to open between 84.40–84.42 against the US dollar from 84.25 in the last session.
  • Strong recent trading in USD/INR in the range of 84–84.25 makes the rupee sensitive to Asian FX moves, particularly the yuan.
Chinese Yuan Impact
  • Offshore yuan fell 0.5% to 7.2350 per dollar after soft Chinese services sector numbers and a lower daily central bank fix.
  • The People's Bank of China reference rate deviation is indicative of efforts to ease yuan appreciation and contribute to uncertainty in the markets.
Broader Asia FX Weakness
  • Some other Asian currencies also fell: Malaysian ringgit and Indonesian rupiah depreciated by 0.3%, and the Taiwanese dollar dipped by 3%.
  • The downfalls followed expectation that US-China tariff tensions would peak, only for new US tariffs and lackluster Chinese data to dispel optimism.
Market Sentiment and Flows
  • The rupee had strengthened to 83.77 on Friday but RBI intervention put a lid on further appreciation.
  • Foreign investors invested $334.7 million in Indian shares on May 2, but continuous outflows are a threat.
Importer and FPI dollar demand is putting pressure on the rupee, and there is no sign of RBI intervention today.
 
Global Factors
 
Brent crude futures gained 1.4% at $61 per barrel, adding to external pressures.
 
US Federal Reserve is likely to maintain rates unchanged, but market participants are looking for hints on future policy.
 
Sources: Reuters, Yahoo Finance, CNBC TV18

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