The Indian rupee surged to its strongest level in three weeks on Wednesday, closing at 87.06 against the US dollar after touching an intraday high of 86.93. A weaker dollar, driven by US President Donald Trump’s fresh tariffs, bolstered the rupee along with steady inflows and lower crude oil prices.
Volatility Marks Rupee’s Best Single-Day Gain in Weeks
The rupee saw significant fluctuations at the interbank foreign exchange market, opening at 87.18 before dipping to 87.20 and later climbing to 86.93. This marked its strongest session since February 11.
Traders pointed to active dollar sales by foreign and state-run banks, which provided support to the rupee. A broader pullback in the US dollar index also contributed, as global investors reevaluated the impact of the latest tariff measures imposed by Washington.
One trader at a major Mumbai-based bank noted, “The rupee’s movement was largely dictated by the dollar’s trajectory, and today, the selloff in the greenback gave a significant push.”
Trump Tariffs Shake Global Markets, Impacting Currencies
Trump’s announcement of new trade tariffs sent ripples through global markets, fueling concerns about an escalating trade war. The president criticized high import duties imposed on US goods by countries such as India, calling them “unfair.” In response, he rolled out reciprocal tariffs on several nations, set to take effect on April 2.
Here’s a breakdown of the key tariff hikes announced:
| Country | Additional Tariff on Imports |
|---|---|
| Canada | 25% |
| Mexico | 25% |
| China | 10% |
Canada quickly retaliated, imposing 25% tariffs on $30 billion worth of US imports, effective March 4. The policy shift has investors worried about global trade disruptions and its effect on major economies.
Weak Crude Oil and Stock Market Recovery Aid Rupee’s Strength
Apart from a softer US dollar, other factors helped the rupee stay resilient. A pullback in crude oil prices provided additional relief, reducing India’s import bill and improving the trade balance. Meanwhile, a sharp rebound in domestic equity markets boosted sentiment among foreign investors.
“We saw strong buying interest from overseas investors in local equities, which helped stabilize the rupee,” said an FX strategist at a private bank. “If this trend continues, the currency could remain supported despite global headwinds.”
What’s Next for the Rupee?
Despite Wednesday’s gains, analysts remain cautious about the rupee’s trajectory in the near term. Some key factors to watch include:
- US Federal Reserve Policy: Any shift in interest rate expectations could drive further dollar volatility, impacting emerging market currencies.
- India’s Trade Balance: The rupee could benefit if lower crude prices persist and exports see a rebound.
- Geopolitical Risks: Further trade tensions or escalations in global conflicts may introduce fresh uncertainty.
Market participants expect the rupee to trade within the 86.80-87.30 range in the coming sessions, depending on external cues and domestic demand-supply dynamics.
For now, the currency remains on firmer footing, buoyed by favorable external factors. However, with global markets on edge over trade policy shifts, investors will keep a close eye on any new developments that could influence the rupee’s direction.
