Indian Rupee Gains Amid US Tax Bill Uncertainty and Dollar Weakness
- Rupee strengthens on dollar weakness
- US fiscal concerns impact dollar
- Rupee rebounds amid global currency gains
The Indian Rupee opened higher on Thursday, reversing a two-day losing streak, as mounting fiscal deficit concerns in the United States exerted pressure on the US Dollar Index. The domestic currency began trading 5 paise stronger at 85.59 against the US dollar, after closing at 85.64 on Wednesday, according to Bloomberg data.
The dollar index, which measures the greenback against a basket of six major currencies, declined for the fourth consecutive day, slipping 0.07 percent to 99.49. This was driven by uncertainty surrounding US President Donald Trump’s sweeping tax and spending bill, which has raised concerns due to its estimated cost of $3.8 to $4.5 trillion over the next decade.
The US House of Representatives Rules Committee advanced the tax cut bill, paving the way for a House floor vote. Market participants are cautious as the proposed tax cuts could widen the US fiscal deficit, potentially weighing on the dollar’s strength.
Despite the rupee’s gains at the open, the currency had fallen on Wednesday, closing at 85.64, pressured by persistent demand for dollars from oil companies and importers, noted Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP. Bhansali expects the rupee to open around 85.52 and trade within the range of 85.25 to 85.75 during the day.
With the dollar index below the critical 100 mark and Asian currencies strengthening, exporters are likely to capitalize on any rupee weakness by selling dollars, Bhansali added.
Also Read More: How Foreign Banks' Dollar Sales Are Strengthening the Rupee
Amit Pabari, Managing Director at CR Forex Advisors, highlighted the impact of a narrowing yield differential between India and the US, which is diminishing the attractiveness of Indian assets and prompting global funds to exit Indian markets. This outflow adds downward pressure on the rupee. Additionally, rising geopolitical tensions in the Middle East have pushed crude oil prices higher, further straining the rupee.
On a positive note, the Chinese Yuan and Japanese Yen have begun appreciating against the dollar, providing some support to the rupee. Technically, Pabari expects the USD/INR pair to trade within a range, facing strong resistance near 85.80, while immediate support lies between 85.20 and 85.30 levels.
Meanwhile, crude oil prices saw a mild dip as a rise in US crude inventories offset reports of a potential Israeli strike on Iranian nuclear sites. Brent crude fell 0.05 percent to $64.88 per barrel, while WTI crude remained steady at $61.57, as of 9:10 AM IST.
