In the early hours of trading on Tuesday, the Indian rupee gained 10 paise, reaching 86.71 against the US dollar. This rise comes as a result of favorable movements in Asian currencies and robust performance in domestic stock markets. However, forex traders caution that the rupee’s advance may be limited due to ongoing global trade uncertainties that could potentially impact economic stability.

Rupee’s Performance Against the Dollar

The rupee began trading at 86.71, reflecting a 10 paise increase from its previous close. On Monday, the currency had already strengthened by 24 paise, ending the day at 86.81. Asian currencies also experienced a slight uplift, with the Chinese yuan at 7.2338, the Indonesian rupiah at 16,395, and the South Korean won at 1,445.

• US Dollar Trends: The US dollar index, which measures the value of the dollar against a basket of six currencies, was up by 0.19%, settling at 103.56.
• Oil Prices: In futures trading, Brent crude rose by 0.21%, reaching $71.22 per barrel.

Economic Concerns Impacting the Rupee

According to Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, the potential economic implications of US President Donald Trump’s aggressive tariff policies are weighing heavily on investor sentiment. Bhansali noted that these policies could lead to a broader economic slowdown, which in turn undermines the dollar’s strength.

• Trade Deficit Insights: India’s trade deficit has recently fallen to a three-and-a-half-year low; however, there is a significant concern regarding sharply contracting exports. Bhansali highlighted that imports also saw a notable decline, the most drastic in 20 months, primarily driven by reduced oil and gold imports.
• Trade Tariffs: The looming threat from Trump’s proposed reciprocal tariffs adds to the uncertainty surrounding exports as global oil prices soften and economic conditions become more volatile.

Domestic Market Overview

On the domestic front, the 30-share BSE Sensex surged by 577.71 points, or 0.78%, reaching 74,747.66 points. Similarly, the Nifty climbed 174.05 points, translating to a 0.77% increase at 22,682.80 points. However, it’s worth noting that foreign institutional investors (FIIs) sold equities worth approximately ₹4,488.45 crore on a net basis on Monday, according to data from the exchange.

As the market continues to navigate these complexities, investors remain vigilant about the potential for further fluctuations in the rupee, influenced by both domestic and international economic landscapes.