USD vs INR: The Indian rupee recovered marginally on Tuesday, January 27, amid a softer US dollar and improved sentiment following a trade deal between India and the European Union, as announced by PM Narendra Modi.
As of 12:45 p.m. IST, the rupee was up 0.06% at 91.724 per dollar, marking a mild rebound after touching a record low of 91.9650 last week.
What’s behind rise in rupee?
Ongoing weakness in foreign capital inflows continued to weigh on the currency, with steady importer hedging amid fears of further depreciation and exporters delaying dollar sales tilted flows against the rupee.
On the day, the rupee drew support from the dollar index, which remained close to a four-month low.
Furthermore, India and the European Union successfully concluded negotiations on a Free Trade Agreement after an 18-year pause, agreeing to broad tariff reductions and elimination.
The EU said the deal is expected to significantly lift its exports to India and strengthen economic ties amid a volatile global trade environment.
Meanwhile, U.S. Treasury Secretary Scott Bessent said on Friday that an extra 25% tariff on India could be rolled back after a sharp decline in India’s imports of Russian oil, providing a boost to market sentiment.
Rupee likely to stabilise around ₹90
According to Emkay Wealth Management, the Indian rupee appears to have found relative stability around the ₹90 mark against the US Dollar. While intermittent volatility has been observed on both sides, market estimates suggest the currency may consolidate around current levels in the near term, according to the brokerage firm.
“India’s status as a net importer continues to weigh on the rupee from a trade perspective; however, improving prospects for foreign investment inflows could provide some support. Overseas investors have been net sellers in Indian equities over the past 18 months, but this sustained sell-off has also led to more attractive valuations across sectors,” the report said.
Analysts at the brokerage believe that deeper rate cuts in the US, which would significantly compress dollar yields, could revive investor appetite for emerging markets such as India.
“The global currency landscape is clearly transitioning into a phase where monetary policy divergence and geopolitical risks will play a defining role. A softer US Dollar, coupled with potential capital reallocation towards emerging markets, creates both opportunities and risks for investors. For India, sustained foreign inflows, supported by stable macro fundamentals, could help the rupee maintain its current range despite global volatility,” said Parag Morey, Head of Sales, Emkay Wealth Management.
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.
