Rupee rallies against dollar amid US-China trade tariff tensions

The rupee opened at 86.22, up 46 paise against the US dollar. During the intra-day trade, it rose to 85.95 before settling at 86.10, up 59 paise against the dollar. The dollar index, which gauges the greenback’s strength against a basket of six currencies, crashed 1.52 per cent to 99.335. The intensity of the US-China trade war will be crucially viewed by the market, which can have the potential to offset the impact of the current pause on trade tariffs on other emerging markets, said an analyst.

“The Indian rupee appreciated after three days of decline following stronger regional currencies and risk-on sentiments. The US government’s decision of pausing reciprocal tariff for 90 days and tit-for-tat approach between US-China weighed on the greenback,” said Dilip Parmar, Senior Research Analyst, HDFC Securities. However, the currency market is expecting more fluctuations as the trade war is unlikely to abate in the near future. Worries over a recession in the US and declining Treasury yields have also weighed on the dollar, boosting the rupee’s gains.

Jateen Trivedi, VP, Research Analyst, LKP Securities, said, “the rupee traded positive with strong gains, supported primarily by a weaker dollar index and a significant sentiment boost from the US decision to relax tariffs on Indian goods by 10 per cent for the next 90 days. This move has been well received by the markets, as it opens the door for further dialogue between the two nations, potentially easing trade tensions in the near future.”

Further, Indian stock markets rallied, reflecting optimism around improving bilateral trade ties and the reduced risk premium for Indian exports. With both global cues and domestic equity strength favouring the rupee, momentum remains upward in the short term. The rupee is expected to trade in the range of 85.50–86.50, with continued support as long as global risk sentiment remains stable and FII inflows are sustained, Trivedi said.

The rupee’s rally is expected to continue, driven by the dollar’s weakness and ongoing trade tensions. However, if global economic uncertainty and trade war fears continue, it may eventually impact the rupee’s performance.