Rupee Jumps 74 Paise to 84.62 Against US Dollar in Early Trade
- The Indian rupee appreciated by 74 paise to 84.62 against the US dollar in early trade on Tuesday.
- Strength in the rupee attributed to easing tensions between India and Pakistan and the US-China trade agreement.
- The rupee opened at 84.70, touched a low of 84.74, and reached a high of 84.62 at the interbank foreign exchange.
The Indian rupee staged a strong comeback in early trade on Tuesday, rising 74 paise to close at 84.62 against the US dollar. The rise was mainly aided by de-escalating geopolitical tensions between India and Pakistan, as well as fresh optimism in the wake of the US-China trade deal.
At the interbank foreign exchange market, the rupee opened at 84.70, touched a low of 84.74, and a high of 84.62, registering a sharp gain of 74 paise compared to its previous close. On Friday, the domestic currency had ended higher by 22 paise at 85.36 against the greenback. Markets remained shut on Monday in observance of Buddha Purnima.
Forex traders explained the rupee's appreciation due to a mix of local and foreign factors. Investor mood improved after India and Pakistan issued a joint statement on Saturday to suspend all military operations along land, air, and sea borders with immediate effect. The move was viewed as a possible step towards regional peace stabilization.
Besides, world market players welcomed the new US-China trade agreement, which included deep cuts in tariffs on both sides. US tariffs on Chinese imports were cut from 145 percent to 30 percent, while Chinese tariffs on US imports were cut from 125 percent to 10 percent. This action relaxed world trade tensions and improved investor sentiment in the world economic outlook.
The dollar index, which tracks the strength of the greenback against a basket of six currencies, fell 20 percent and was at 101.58. The decline was a reversal of Monday's steep 1.30 percent jump after the US-China deal and a side US-UK trade agreement. These agreements prompted market participants to reassess their bets on US Federal Reserve rate cuts, with most now expecting only two cuts for the year.
Even as the rupee appreciated, India's equity markets saw a decline. The benchmark BSE Sensex dropped by 902.68 points or 1.10 percent to close at 81,527.22, while the NSE Nifty dropped 207.15 points or 0.83 percent to close at 24,717.55.
On the oil front, Brent crude futures fell by 0.22 percent to USD 64.82 a barrel. Although this brings some comfort to India's import bill, analysts cautioned that the recent jump in crude prices to close to USD 65 levels would put pressure on the trade deficit of the country.
Describing the outlook, CR Forex Advisors MD Amit Pabari stated, "Technically, the USDINR pair is still in a downtrend. Each rally will offer a selling opportunity, with the pair likely to trade between 84.50-85.10".
Foreign institutional investors (FIIs) were net buyers, injecting Rs 1,246.48 crore in equities on Monday, as per exchange data, further boosting the rupee's recovery.
