Indian rupee trades over 1 pc higher after US trade deal

Mumbai, Feb 3: India’s currency strengthened to 90.29 against the US dollar on Tuesday, rising more than 1% as investor confidence grew following a newly announced trade agreement between India and the United States. The deal triggered increased foreign capital inflows into Indian markets.

The rupee had ended the previous session at 91.53 to the dollar after gaining 48 paise, reaching its strongest position in two weeks. Market sources indicated the Reserve Bank of India actively intervened in spot market transactions to stabilize the currency.

Currency analysts observed the rupee initially strengthened further before stabilizing within a 90.20–91.20 trading range. This consolidation followed a retreat from levels above 92 per dollar, suggesting temporary corrective movement.

Market strategists noted the currency maintains its broader upward trajectory despite recent fluctuations: “The current pullback appears temporary, with the overall bullish pattern remaining intact when viewed across longer time horizons.”

Technical indicators suggest potential near-term support between 90.50–90.80 levels. Analysts cautioned that a decisive break below this range could test the 89.80–90.00 support zone.

The rupee’s appreciation has limited upside movement in MCX gold and silver contracts. However, market watchers maintain a positive medium-term outlook for precious metals as global economic uncertainties persist.

The trade breakthrough came after a phone discussion between US President Donald Trump and Indian Prime Minister Narendra Modi. The agreement includes slashing US tariffs on select Indian exports from 25% to 18% while addressing energy trade balances.

As part of the arrangement, New Delhi reportedly committed to decreasing Russian oil imports while increasing energy purchases from American suppliers and potentially Venezuela.

Reduced trade friction between the economic powers is expected to enhance India’s appeal to international investors. “This development could accelerate foreign portfolio investments in both equity and debt markets, bolstering rupee demand,” commented a senior treasury analyst at a Mumbai-based bank.

Financial institutions anticipate combined effects from the India-US pact, ongoing EU trade negotiations, and recent fiscal stimulus measures to significantly improve India’s Balance of Payments situation through accelerated capital inflows.

—IANS