Mumbai, February 4 (PTI) – The Indian rupee made a modest recovery of 13 paise in early trade on Tuesday, rising to 86.98 against the US dollar. This recovery followed a significant development on Monday, when former US President Donald Trump agreed to a 30-day pause on tariffs against Mexico and Canada. The announcement provided relief to global markets, prompting a retreat in the US dollar.
Forex traders noted that the US dollar index, which had surged above the 109.88 mark, eased to 108.74 following Trump’s decision to hold off on the tariffs. The Indian rupee opened at 86.98, up by 13 paise from its previous close of 87.11, marking a sharp rebound from Monday's all-time low.
On Monday, the rupee had dropped 49 paise to an unprecedented low of 87.11, amid global concerns about US tariff policies. Analysts indicated that the currency’s performance was directly impacted by market reactions to Trump’s tariff threats, which had fueled broader dollar strength.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said, “The Indian rupee opened near 86.98 on Tuesday, showing signs of relief following Trump’s temporary tariff reprieve on Mexico and Canada. We expect the rupee to trade within a range of 86.80 to 87.20 today, with any dips likely to be bought.” Bhansali also noted that premiums had risen on Monday after the Reserve Bank of India (RBI) set the cut-off for six-month swaps higher than expected.
In an effort to manage currency volatility, Finance Minister Nirmala Sitharaman stated on Monday that the value of the Indian rupee was determined by market forces and that there had been no devaluation, a term typically associated with fixed exchange rate regimes. Finance Secretary Tuhin Kanta Pandey also reassured markets, saying there was no concern over the rupee’s value and that the RBI was actively managing fluctuations.
Meanwhile, the US dollar index, which tracks the greenback against a basket of six major currencies, was trading 0.22% lower at 108.74. In global commodity markets, Brent crude oil fell by 0.57% to $75.54 per barrel, providing additional relief for the rupee.
On the domestic front, the equity market showed a positive trend. The 30-share BSE Sensex rose 716.50 points, or 0.93%, to reach 77,903.24 points, while the Nifty climbed 199.15 points, or 0.85%, to 23,560.20 points. Despite these gains, Foreign Institutional Investors (FIIs) remained net sellers, offloading equities worth Rs 3,958.37 crore in the capital markets on Monday.
In another sign of optimism, India’s manufacturing sector showed strong growth at the start of 2025. According to a monthly survey, the HSBC India Manufacturing Purchasing Managers' Index (PMI) rose to 57.7 in January, up from December’s one-year low of 56.4. This increase was largely driven by the fastest growth in new export orders in nearly 14 years.
The news of Trump’s tariff pause and the positive domestic manufacturing data provided a much-needed boost to market sentiment, though volatility is expected to continue as global economic factors evolve.
Key Market Movements:
- Indian Rupee: 86.98 (+13 paise from previous close)
- US Dollar Index: 108.74 (-0.22%)
- Brent Crude: $75.54 per barrel (-0.57%)
- BSE Sensex: 77,903.24 (+716.50 points)
- Nifty: 23,560.20 (+199.15 points)
- FII net sales: Rs 3,958.37 crore
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