Rupee Strengthens by 20 Paise to 94.20 Amid Optimism for India-US Trade Agreement
Rupee began Friday on a strong note, rising 20 paise against the US dollar in early trade. The currency climbed to 94.30 in the interbank foreign exchange market before strengthening further to 94.20. This gain follows the rupee’s all-time closing low in the previous session, driven by optimism surrounding an India-US trade agreement.
Trade Agreement Boosts Sentiment
Market participants attributed the rupee’s recovery to improving foreign inflows and softer crude oil prices. Forex traders noted a positive sentiment towards the rupee, coinciding with renewed momentum in trade discussions between India and the United States. Foreign Secretary Vikram Misri stated that trade was a key topic during talks between Prime Minister Narendra Modi and US President Donald Trump, with both leaders urging negotiators to expedite the proposed trade agreement.
Misri reported that significant progress had been made on the interim trade pact. He also mentioned that US Trade Representative Jamieson Greer is expected to visit India next week to continue negotiations. These discussions followed a meeting between Modi and Trump at the G7 Summit, marking their first extensive talks in 16 months.
RBI’s Strategy Amid Dollar Inflows
Analysts suggested that the Reserve Bank of India (RBI) might leverage the recent inflow of dollars to bolster its reserve position. Amit Pabari, MD of CR Forex Advisors, indicated that the RBI could use incoming dollar flows to rebuild forex reserves and gradually reduce its large forward dollar book, estimated at around USD 110 billion. He noted that the central bank may have already purchased USD 3–5 billion over the last two sessions.
Pabari emphasized that this activity does not signal concern but rather reflects the RBI’s strategy to take advantage of favorable market conditions. However, he cautioned that such buying could slow the pace of rupee appreciation, making the movement stronger but more gradual.
Market Reactions
Globally, the dollar index edged up 0.08% to 100.92. Meanwhile, Brent crude futures declined 0.85% to $79.17 per barrel, providing support to emerging market currencies, including the rupee. Despite the currency’s gains, domestic equities traded lower. The Sensex fell 786.58 points to 76,624.90 in early trade, while the Nifty slipped 210.95 points to 23,959.80. Foreign institutional investors were net sellers on Thursday, offloading equities worth Rs 1,025.20 crore.
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