In a surprising turnaround, the Indian rupee recorded a sharp recovery against the US dollar on Tuesday, gaining 17 paise to close at ₹89.88 per dollar, reversing early-session losses triggered by fresh tariff threats from US President-elect Donald Trump.
Tariff Shock Pushes Rupee Past 90-Mark in Early Trade
Markets opened on a tense note after Trump, in a sudden morning announcement, targeted Indian Basmati rice exports, signalling steep new tariffs.
The move sent the rupee tumbling to ₹90.15, a 10-paise fall from Monday’s close of ₹90.05, breaching the psychological ₹90 threshold.
Domestic equities mirrored the uncertainty, with:
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Sensex plunging 436 points to 84,666.28
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Nifty slipping 121 points to 25,839.65
The declines followed foreign institutional investor (FII) outflows of ₹655.59 crore recorded the previous day.
Global Factors Help Rupee Bounce Back
Analysts attributed the intraday recovery to favourable global cues:
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US Dollar Index weakened by 0.10% to 98.88
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Brent crude fell to $62.33 per barrel, a positive sign for India, a major crude importer
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Expectations of a 25 bps rate cut by the US Federal Reserve, with a 90% probability, further weighed on the dollar
In addition, India and the US are set to begin three-phase bilateral trade talks on Wednesday, offering optimism on the diplomatic front.
RBI Intervention Likely Boosted Confidence
“The recovery most likely will be the result of the RBI movement and the drop in crude prices. However, without the Fed movement, prices might not shift as much,” said Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan.
He expects the USD-INR range to fluctuate between 89.50 and 90.30 in the near term.
Outlook: Strong Rupee May Cushion India’s Economic Risks
Experts believe India’s economic trajectory will continue to face challenges due to its complicated equation with the incoming Trump administration.
However, the unexpected resilience of the rupee may help offset market volatility.
While investors are expected to tread cautiously, analysts maintain that the rupee’s recovery reflects strong underlying fundamentals and could reinforce its position in global markets.