Rupee vs Dollar: US-China trade war and its impact on INR vs USD deviation, here is what experts say

Rupee vs Dollar: After fresh escalation in the US-China trade tension, Chinese government depreciating its yuan by 7 per cent and the US President Donald Trump levying 10 per cent import duty on the Chinese imports, the emerging economies are expected to receive its impact and so does the national currencies of the emerging economies. According to the market experts, yuan is the lead indicator of emerging markets and India is not an insulated part of this. So, if yuan is getting hit by the Sino-US trade war, so does the Indian National Rupee (INR).

Speaking on the rupee-dollar deviation Rahul Gupta, Currency Research Head, Emkay Global Financial Services Limited said, "The global trade turmoil between US-China and political imbalance in Kashmir led USD/INR spot open at the 11-week high. Trade tensions were revoked after China retaliated to counter the tariff threat. China has asked state purchasers to halt imports of American agricultural products. These lead Chinese yuan dropped to an 11-year low of 7.04, putting pressure on emerging market currencies including the rupee. I believe that the risk-off mood will continue to stay for some time now." Gupta said that over the day, USD/INR violated the major resistance of 70.20 from its 200 SMA. If the pair closes above 70.20 then the view will continue to be bullish and we can see 71.30 before the month-end. While on the downside 69.85 will continue to act as strong support. 

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Hitesh Jain, Vice President at YES Securities said, "Volatility in Indian Rupee subsided even though RBI lowered interest rates for the fourth time, delivering a bigger than expected 35bps cut. It seems the currency derived cues from expectations of government rolling back the recently imposed higher tax on Foreign Portfolio Investors. Meanwhile, New Zealand dollar fell heavily after its central bank put through a surprise 50bps cut (to 1%) and stated negative rates are a possibility. The Aussie dollar fell in sympathy as expectations rise that Australian Central Bank too will cut rates faster and deeper than previously expected." He said that China’s Yuan drifted above 7 marks against the greenback, with the Chinese government allowing it to weaken to counter the impact of US tariffs. However, PBOC later intervened to stem the slide after US Treasury formally took steps to officially brand China a currency manipulator. Sterling struggled amid reports that PM Boris Johnson may call for general elections after his party's majority decreased to just one seat.