Rupee Soars, Climbs 74 Paise Against US Dollar

The Indian rupee witnessed a strong appreciation in early trade on Tuesday, rising 74 paise to 84.62 against the US dollar. This surge was underpinned by positive geopolitical developments between India and Pakistan, coupled with easing global trade tensions, particularly between the US and China. Currency traders attributed the rupee's strength to continued foreign investor interest and a favourable global backdrop.

The domestic currency opened at 84.70 at the interbank foreign exchange market, touched a low of 84.74, and later strengthened to a session high of 84.62. This marked a significant gain from Friday's close of 85.36. Trading was suspended on Monday due to the Buddha Purnima holiday, reported PTI.

Peace Efforts and Trade Deals Boost Sentiment

A major driver behind the rupee’s rise was the announcement over the weekend that India and Pakistan  agreed to halt all military actions across land, air, and sea with immediate effect. This diplomatic breakthrough helped reduce regional tensions and uplifted market confidence.

Meanwhile, a US-China trade agreement provided further momentum. The deal involved substantial tariff cuts, with the US reducing tariffs on Chinese imports from 145 per cent to 30 per cent, and China slashing tariffs on American goods from 125 per cent to 10 per cent. This development  raised hopes for stronger global trade flows and improved risk sentiment.

"The dollar index rose over 1.30 per cent on Monday, driven by the US-China trade agreement, where both sides significantly reduced tariffs. Combined with the already signed US-UK trade deal, traders are now pricing in only two rate cuts this year, pushing bond yields higher, which supported the dollar Index," said CR Forex Advisors MD Amit Pabari.

Despite this uptick in the dollar index, it was down 20 per cent at 101.58 on Tuesday, offering additional support to emerging market currencies like the rupee.

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Oil Prices, Equities, and Market Outlook

While global sentiment was broadly positive, Brent crude futures saw a slight dip of 0.22 per cent to $64.82 per barrel. Pabari highlighted that the recent upward movement in oil prices to near USD 65 levels could exert pressure on India's trade balance.

“Over the last few sessions, Brent crude prices have surged to near $65 per barrel, which could widen India's trade deficit,” Pabari noted.

From a technical viewpoint, analysts expect the USDINR pair to stay within a narrow trading band. “From a technical perspective, the USDINR pair remains in a downtrend, and every uptick is likely to present a selling opportunity. For now, the pair is expected to trade within a range of 84.50-85.10,” Pabari said.

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