MUMBAI, March 4 (Reuters) - The Indian rupee will contend with conflicting forces on Tuesday after risk soured on U.S. President Donald Trump's comments that his proposed tariffs will proceed, and the dollar sold off on worries over U.S. growth.

The 1-month non-deliverable forward indicated that the rupee will open mostly flat to the U.S. dollar from its previous close of 87.3700.

At the current level of the rupee, the risks are "broadly balanced", a currency trader at a bank said.

"And today, interbank will be quite unsure at open what to do. On one hand, the way U.S. yields are falling suggests the dollar is in trouble and on the other is the risk mood," he said.

The S&P 500 index logged its biggest decline this year on Monday after Trump dashed hopes of a last-minute reprieve from tariffs for Canada and Mexico, with the levies expected to come into effect at 10:31 a.m. IST. The Canadian dollar and the Mexican peso dropped to an over one month low.

The dollar index and U.S. Treasury yields dropped after U.S. economic data reinforced growth worries. The ISM manufacturing index indicated a slower pace of expansion, and more worryingly the new orders and employment indices fell into contraction territory.

Two narratives were weighing on the dollar currently - U.S. policy uncertainty having a negative impact on data, and the potential for more fiscal spending in the European Union, Morgan Stanley said in a note.

The euro rallied more than 1% against the dollar on Monday.

Meanwhile, other Asian currencies were mostly range bound. The Chinese yuan was marginally higher at 7.2920 to the dollar. Chinese exports to U.S. will face an additional 10% tariff from Tuesday.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 87.58; onshore one-month forward premium at 20.5 paisa

** Dollar index at 106.56; dropped 1% on Monday

** Brent crude futures down 0.6% at $71.2 per barrel

** Ten-year U.S. note yield at 4.14%, lowest since Dec

** As per NSDL data, foreign investors sold a net $1,376 million worth of Indian shares on February 28

** NSDL data shows foreign investors bought a net $68.7 million worth of Indian bonds on February 28

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https://www.reuters.com/markets/currencies/rupee-navigate-us-tariffs-spurred-risk-off-dollar-plunge-weak-data-2025-03-04/