The Indian rupee registered modest gains against the US dollar during early trading on Tuesday, supported by a weaker American currency amidst lingering concerns about the long-term health of the US economy.
Market Movements and Key Levels
In the interbank foreign exchange market, the domestic currency opened at 88.79 against the US dollar. It then strengthened to touch an early high of 88.67, marking an appreciation of 6 paise from its previous close. Later, the rupee was seen trading at 88.71 against the greenback. On Monday, the rupee had settled at 88.73.
Driving Forces Behind the Rupee's Performance
Forex traders pointed to several factors influencing the rupee. Positive global cues, including progress on the US shutdown bill and optimism surrounding a nearing US trade deal, provided support for the local unit. This sentiment was bolstered by comments from US President Donald Trump, who expressed that the United States is "pretty close" to reaching a "fair trade deal" with India.
In a significant statement, Trump indicated a willingness to ease tariffs on Indian goods. "We're making a deal with India, a much different deal than we had in the past. So right now, they don't love me, but they'll love us again," the President said on Monday. A research note from IFA Global linked this potential tariff reduction to India having scaled back its purchases of Russian crude oil.
However, not all factors were favorable. A muted trend in domestic equities and continued foreign fund outflows weighed heavily on investor sentiment. On the domestic equity front, the Sensex declined 175.32 points to 83,360.03, while the Nifty dropped 51.60 points to 25,522.75 in early trade. According to exchange data, Foreign Institutional Investors (FIIs) offloaded equities worth ₹4,114.85 crore on Monday.
Global Market Context
The broader global market landscape showed a slightly stronger US dollar, with the dollar index, which measures the greenback against a basket of six major currencies, trading 0.06 per cent higher at 99.65. In the commodities market, Brent crude futures, the global oil benchmark, were trading 0.14 per cent lower at USD 63.97 per barrel.
The rupee's tight trading range reflects a market balancing positive international developments against domestic headwinds, creating a cautious yet slightly optimistic trading environment for the Indian currency.
