The currency drew support from an interim trade framework released jointly by India and United States on Friday (Februray 6), which signalled a potential reduction in US tariffs on Indian goods and closer economic cooperation. The agreement followed prolonged negotiations and helped lift the rupee to its best weekly gain in more than three years.
Analysts at Goldman Sachs said that while granular details remain unavailable, they estimate that after accounting for exclusions, the effective US tariff rate on Indian imports could be around 20 percentage points lower than the earlier 34%.
Market participants said such relief may ease external pressure on the rupee, which has fallen about 3.5% since late August, when US tariffs came into effect.
However, the joint statement did not reference India’s purchases of Russian oil, nor did it include a formal commitment from India to halt them—an omission that traders said keeps some policy uncertainty intact.
Positioning turns less bearish
Currency traders noted that sentiment against the rupee had already softened last week. A dealer at a Mumbai-based bank said demand for short rupee bets declined, reflected in weaker non-deliverable forward (NDF) premiums and calmer onshore trading conditions.
Still, market participants cautioned that a sustained move below the 90-per-dollar mark is not guaranteed. The next phase of the rupee’s trajectory will largely depend on exporter dollar sales and foreign portfolio flows.
Foreign investors have so far been net buyers of Indian equities in February to the tune of about $900 million, reversing roughly $4 billion in outflows seen in January. Yet daily data remains uneven—NSDL figures show that foreign investors sold $145.2 million in Indian shares and $2.6 million in bonds on Feb. 5.
Global backdrop mixed
Broader market cues were varied. Asian equities rose after a strong electoral outcome for Japan’s Prime Minister Sanae Takaichi, though the Japanese yen weakened.
Key indicators were largely steady:
The dollar index stood at 97.59.
Brent crude futures fell 0.7% to $67.6 per barrel, a modest positive for India’s import bill.
The 10-year US Treasury yield held at 4.22%, keeping global financial conditions relatively tight.
Forward market signals
In derivatives trading, the one-month NDF was quoted at 90.61, slightly weaker than the spot open, suggesting limited expectations of sharp near-term appreciation. The onshore one-month forward premium was at 12.75 paise, indicating stable hedging demand.
What to watch
Traders said the rupee’s near-term path will hinge on whether foreign inflows persist, how exporters behave at current levels, and how global risk sentiment evolves. For now, the currency has gained ground—but its durability remains contingent on flows rather than policy headlines alone.
-With Reuters inputs
