The Indian rupee is likely to open weaker on Tuesday, weighed down by a jump in the dollar index following a steep decline in the euro, as investors digested the implications of the recent US-EU trade deal.

The Euro has accelerated its downward momentum vs. the US Dollar (USD) on Monday, sending EUR/USD south of the 1.1600 support to hit new two-week troughs. The pullback came as the Greenback found its footing again, nudging the Dollar Index (DXY) well north of the 98.00 hurdle.

“Further euro strength is likely to be self-defeating,” said Valentin Marinov, a currency strategist at Crédit Agricole, a French bank. Exports were already likely to weaken and become a drag on the eurozone economy because of U.S. tariffs and European government policies that would encourage more imports.

The pound briefly hit a two-year low versus the euro on Monday, before rebounding, and dipped on the dollar, though its moves were largely a function of those elsewhere as investors digested the announcement of an EU-U.

The EU needs more than a digital euro to respond effectively to the USD stablecoin surge, according to ECB adviser Jürgen Schaaf.

There is a chance for Euro (EUR) to rise above 1.1775 against US Dollar (USD); the major resistance at 1.1795 is likely out of reach for now. In the longer run, price action indicates further EUR strength, likely toward 1.1795, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

The Indian rupee declined to its weakest level since mid-March in early trade on Tuesday, as a slump in the euro sharply raised the dollar index, and demand for the greenback from state-run banks added to the pressure.