The rupee closed up 0.3% at 86.2050 per U.S. dollar, and was up 0.5% this week, highest since week ended Aug. 25, 2023.
It, however, underperformed its regional peers. The Korean won rose nearly 2% and the offshore Chinese yuan climbed 1.3%.
The dollar index was down 1.7% so far this week, after Trump, who had threatened tariffs on Canada, Mexico, the European Union and China, did not immediately put them into effect.
In a separate interview, Trump also suggested that he could reach a trade deal with the world’s second-biggest economy.
Without the “damaging headlines from Trump on tariffs”, the dollar has struggled, Srinivas Puni, managing director at QuantArt Market Solutions, said. “USD/INR is in the process of finding a range around the 86.50 mark for now. However, it remains vulnerable over the longer horizon given the domestic issues related to current account and flows.” he said. Portfolio flows into India have been weak amid uncertainty around Trump’s policies, sluggish growth and higher U.S. yields. So far this month, foreigners have taken out more than $7 billion from Indian equities.
The dollar/rupee forward premiums, meanwhile, extended declines this week, as the Reserve Bank of India conducted buy/sell swaps alongside its spot intervention.
The 1-year implied yield on dollar/rupee forwards is down almost 50 basis points from its recent highs, at 2.29%.
