Rupee strengthens in early trade on India–US interim trade pact optimism

The rupee advanced sharply against the US dollar in early trade on Monday, buoyed by positive sentiment following the announcement of a framework for an interim trade agreement between India and the United States.

In the interbank foreign exchange market, the domestic currency opened weaker at 90.66 per dollar but quickly recovered, strengthening to 90.44. This marked a gain of 21 paise from its previous close. On Friday, the rupee had fallen 31 paise to settle at 90.65, after touching an intraday low of 90.70.

Forex market participants said the initial weakness was short-lived as traders reacted positively to developments over the weekend. India and the US announced that they had agreed on the broad contours of an interim trade deal aimed at boosting bilateral commerce by lowering import duties on a range of products.

Support for the rupee also came from a softer dollar index, firm domestic equity markets and stable crude oil prices. The dollar index, which measures the greenback against a basket of six major currencies, was down 0.05 per cent at 97.58. Brent crude futures slipped 0.94 per cent to USD 67.41 a barrel.

Market experts noted that the Reserve Bank of India has remained active in the currency market. “The RBI is intervening on both sides, selling dollars on sharp upticks to curb excessive depreciation, while also checking rapid appreciation by buying dollars around the 90.05 level after the US–India deal announcement,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

Under the proposed arrangement, the US is set to lower tariffs on Indian goods to 18 per cent from the current 50 per cent. In return, India will remove or substantially reduce import duties on all US industrial goods and a broad range of agricultural and food products, including animal feed grains, nuts, fruit, soybean oil, wine and spirits.

A joint statement also indicated that India plans to purchase around USD 500 billion worth of US energy products, aircraft and parts, precious metals, technology goods and coking coal over the next five years.

Domestic equity markets reflected the improved risk appetite. In early trade, the BSE Sensex surged 415.97 points to 83,996.37, while the Nifty climbed 126.05 points to 25,819.75. Foreign institutional investors were net buyers on Friday, purchasing equities worth Rs 1,950.77 crore, according to exchange data.

Adding to the positive backdrop, India’s foreign exchange reserves rose by USD 14.361 billion to a fresh record high of USD 723.774 billion in the week ended January 30, the Reserve Bank of India said on Friday. This followed an increase of USD 8.053 billion in the previous week, when reserves had already crossed the earlier peak recorded in September 2024.

With PTI input