The Rupee Strengthens Against the US Dollar on Positive Trade Sentiments
Amidst positive sentiments following the announcement of a framework for an interim trade pact between India and the US, the Indian rupee made significant gains against the US dollar, rising by 21 paise to 90.44 in early trade on Monday.
Forex traders noted that the rupee initially opened lower but quickly recovered, buoyed by the agreement between India and the US to reduce import duties on various goods to enhance bilateral trade. Additionally, the retreat of the dollar index and a positive trend in domestic equities further bolstered investor confidence.
Starting at 90.66 against the US dollar, the rupee strengthened to 90.44, marking a 21 paise increase from the previous close. This positive movement followed a 31 paise decline on Friday, settling at 90.65 against the US dollar.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, highlighted the Reserve Bank of India’s intervention in the forex market to curb excessive depreciation and appreciation of the rupee following the US-India trade deal announcement.
Key Points of the Trade Agreement
Under the interim trade pact, the US will reduce tariffs on Indian goods to 18% from the current 50%, while India will either eliminate or reduce import duties on various US industrial goods and agricultural products. This includes items such as soybean oil, tree nuts, wine, and spirits.
Both countries have agreed on India’s purchase of USD 500 billion worth of US energy products, aircraft parts, and technology over the next five years, as outlined in a joint statement.
Market and Economic Indicators
Despite a slight dip in the dollar index, trading at 97.58, Brent crude prices fell by 0.94% to USD 67.41 per barrel. On the domestic front, the Sensex surged by 415.97 points to 83,996.37, while the Nifty rose by 126.05 points to 25,819.75.
Foreign Institutional Investors displayed confidence in the market by purchasing equities worth Rs 1,950.77 crore on Friday. Meanwhile, India’s forex reserves reached a new all-time high of USD 723.774 billion, increasing by USD 14.361 billion during the week ended January 30, as reported by the Reserve Bank.
Overall, the positive trade developments and market indicators have contributed to a strengthened rupee and optimistic investor sentiment in the Indian economy.
