The Indian rupee commenced trading on a weaker footing on Wednesday, declining by 22 paise to reach 90.54 against the US dollar. This movement followed a significant rally in the previous session, where the currency demonstrated remarkable strength.
Tuesday's Impressive Performance
On Tuesday, the rupee recorded an exceptional performance, surging by 122 paise, which translates to a substantial 1.33% gain. The currency settled at 90.27 against the dollar, marking one of its strongest single-day performances in recent weeks.
Trade Agreement Boosts Currency
The dramatic spike occurred shortly after India and the United States announced reaching a comprehensive trade agreement. This development positioned the rupee as Asia's best performing currency, according to market analysts and financial experts.
Forex market participants observed that the currency climbed to its strongest level in nearly two-and-a-half weeks. The rally of almost 1.5% was directly attributed to the positive sentiment generated by the trade deal announcement.
Multiple Factors Supporting Momentum
The currency's upward momentum received additional support from several favorable market conditions:
- Dalal Street Performance: Indian stock markets showed strong performance, gaining approximately 2.7%
- Crude Oil Prices: Softer crude oil prices contributed to positive sentiment
- Foreign Inflows: Expectations of increased foreign institutional investment flows
Details of the Trade Agreement
As part of the bilateral agreement, the United States will lower reciprocal tariffs on Indian goods to 18 percent. This rate is notably lower than those applicable to other major trading nations including China, Bangladesh, and Vietnam.
Prime Minister Narendra Modi addressed the agreement on Tuesday, describing it as a "big decision" that would benefit everyone in the country. He emphasized that his government consistently works in the national interest when negotiating such international agreements.
Market Expectations and Analysis
Traders and financial analysts believe the trade agreement could encourage the return of foreign institutional investors to Indian markets. They noted that an improvement in capital flows, particularly in calendar year 2026, may help ease pressure on the rupee and contribute to greater currency stability.
Other Market Developments
In related financial market movements:
- The dollar index, which tracks the US currency against six major peers, declined by 0.05% to 97.57
- Brent crude futures edged lower by 0.14% to $66.18 per barrel
Market observers continue to monitor these developments closely, as they may influence the rupee's trajectory in the coming trading sessions. The currency's performance remains a key indicator of India's economic health and international trade relationships.
