Rupee Gains by 1.10 Against US Dollar Post India-US Trade Deal

The Indian rupee strengthened by 1.10 against the US dollar on Tuesday, February 3, reflecting renewed optimism in currency markets. Early trading saw the rupee hovering around ₹90.40/$, marking a significant rebound from recent weakness.

Analysts attribute the recovery to expectations that the recent trade agreement between India and the US will enhance investor confidence and encourage foreign portfolio inflows. The deal has eased high tariffs on Indian exports, removing a major source of uncertainty that had previously weighed on the currency.

Why the Rupee Weakened

The rupee was the weakest Asian currency in 2025, dropping nearly 5% over the year and more than 2% in January alone.

Key factors behind the weakness included:

• Limited foreign inflows into Indian markets
• High dollar demand from importers, putting pressure on the currency

Potential Impact of the Trade Deal

The removal of tariff-related concerns is expected to:

• Boost export competitiveness
• Reduce policy uncertainty, providing clarity for businesses and investors

Corporate Hedging Adjustments

Previously, importers had increased forward dollar purchases to hedge against further rupee depreciation, while exporters delayed hedging, creating an imbalance that amplified pressure on the currency.

Analysts now expect this imbalance to narrow as tariff concerns ease, supporting a healthier demand-supply dynamic in the currency market.

Traders also anticipate a moderation in speculative bets against the rupee, which could further reinforce the recovery. However, the durability of the gains will hinge on actual foreign inflows and broader market sentiment in the coming days.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in securities market are subject to market risks, read all the related documents carefully before investing.