Following a strong rebound after India and the US agreed to a trade pact on alleged dollar purchase by importers and corporations, the rupee fell 22 paise to 90.54 against the US dollar in early trading on Wednesday.
Rupee Movement After India-US Trade Pact Optimism
There is currently no signed or formally announced trade agreement, framework text, or final documentation, so even with the upbeat atmosphere following the India-US trade pact, forex dealers advised caution.
The rupee opened at 90.35 versus the US dollar on the interbank foreign currency market, but it lost strength and dropped to 90.54, losing 22 paise from its previous finish.
Previous Session Performance
After India and the US agreed to a trade deal, the Indian rupee became the best-performing Asian currency on Tuesday, with a record gain of 117 paise, or 1.28 percent, in a single trading session to end at 90.32 against the US dollar.
Anil Kumar Bhansali, Head of Treasury and Executive Director of Finrex Treasury Advisors LLP, stated, “The rupee was back to its own self of falling after Tuesday’s excellent news as RBI bought dollars towards the end to take the dollar up to 90.2650.”
Market Caution and RBI Activity
As the India-US trade agreement is still pending formalization, forex traders reported that investors are trading cautiously. “Any sustained turnaround in FII flows would depend on additional clarity surrounding the final structure and commitments inside the contract,” stated Amit Pabari, MD of CR Forex Advisors.
“Given its long-standing commercial and strategic links with Moscow, moving away from inexpensive Russian oil could prove tough for India, and may have effects for India’s energy costs and external balance,” Pabari added.
Energy Imports and Geopolitical Impact
President Trump declared that India will stop purchasing Russian crude over an undetermined period of time while increasing imports of US energy, including coal and oil, and possibly Venezuelan crude with US approval.
The 89.80–90.00 range should serve as solid support, according to Pabari.The approval of the final trade agreement and its details will ultimately determine the rupee’s path. Whether this move continues or pauses for consolidation will depend on that clarity, he stated.
💱 Rupee Volatility Snapshot
- Opening Level: 90.35/USD
- Early Trade Low: 90.54/USD
- Previous Close: 90.32/USD
- Key Trigger: Corporate and importer dollar buying
- RBI Action: Dollar purchases capped rupee gains
🌍 India-US Trade Deal Watch
- Status: No formal agreement signed yet
- Investor Mood: Optimistic but cautious
- Energy Angle: Possible shift from Russian crude
- External Impact: Oil prices and current account balance
- Key Support Zone: 89.80–90.00 per dollar
Global and Domestic Market Indicators
At 97.41, the dollar index, which measures the strength of the US dollar relative to a basket of six other currencies, was down 0.02 percent. In futures trading, Brent crude, the world’s benchmark for oil, was up 0.65 percent at USD 67.77 per barrel.
In early trading, the Nifty was up 51.90 points to 25,779.45 while the Sensex was up 68.49 points to 83,816.96 on the domestic equity market. Exchange data shows that foreign institutional investors bought Rs 5,236.28 crore worth of stocks on Tuesday.
Frequently asked questions
1. What caused the rupee to weaken in early trade relative to the US dollar?
Even after the India-US trade accord triggered a previous surge, the rupee fell 22 paise to 90.54/USD as a result of suspected dollar buying by importers and corporations.
2. How did the rupee do during the last session?
Following the news of the India-US trade pact, the rupee was the best-performing Asian currency on Tuesday, rising 117 paise (1.28%) to close at 90.32/USD.
3. Why is the FX market being cautious?
Due to the lack of formal signing and release of the India-US trade agreement, as well as the lack of final documentation and a framework text, traders continue to exercise caution.
4. What are the rupee’s main support levels?
Analysts predict that the 89.80–90.00 range will provide solid support. The final trade agreement’s details and confirmation will determine the future course.
5. What effects are international influences having on the rupee?
Changes in energy imports, such as a move away from Russian crude, possible US oil imports, and the global dollar index, have an effect on the rupee. At USD 67.77 a barrel, Brent crude futures were trading higher.
Conclusion
Despite recent advances following the announcement of the India-US trade accord, the rupee fell 22 paise to 90.54/USD in early trading. The lack of official trade agreement documentation, corporate dollar demand, and global energy uncertainties all contribute to the continued market prudence.
To determine the future direction of the rupee, investors and forex dealers will probably keep an eye on FII flows, oil prices, and the specifics of the final trade deal.
Disclaimer
This content is for informational purposes only and does not constitute financial or investment advice. Consult a professional before making any decisions.
