The Indian rupee surged significantly in early trade on Tuesday, gaining 39 paise to settle at 85.71 against the US dollar, as domestic equity markets witnessed a strong rally and global crude oil prices hovered near record lows. Despite continued foreign capital outflows, the local currency found support from a weaker dollar index and positive sentiment from the US decision to suspend additional tariffs on Indian goods.
Equity market rally and weak dollar support rupee
The rupee opened strong at 85.85 at the interbank foreign exchange market and continued to gain, reaching 85.71 in early trade—39 paise higher than its previous close. On Friday, it had already posted a strong gain of 58 paise, closing at 86.10 per US dollar. Forex markets remained closed on Monday due to Ambedkar Jayanti.
One of the key reasons behind this momentum was the robust performance in domestic equity markets. The 30-share BSE Sensex climbed by 1,516.53 points or 2.02%, reaching 76,673.79, while the NSE Nifty advanced by 454.60 points or 1.99%, hitting 23,283.15. Both indices had ended Friday’s session with nearly 2% gains, contributing to an overall bullish market sentiment.
Tariff relief and crude price drop provide tailwinds
According to forex traders, the US administration’s recent decision to suspend an additional 26% tariff on Indian imports until July 9 has been a significant driver behind the rupee’s upward trend. This move improved investor confidence and bolstered expectations for improved trade flows between the two countries.
Meanwhile, crude oil prices also contributed to the rupee’s rise. Brent crude, the international oil benchmark, slipped 0.06% to USD 64.92 per barrel in futures trade, easing concerns over India’s import bill and reducing pressure on the currency.
Although foreign institutional investors (FIIs) offloaded equities worth Rs 2,519.03 crore on a net basis on Friday, according to exchange data, the rupee remained resilient due to the combined effect of a rally in stocks, favorable crude prices, and a subdued dollar index. The dollar index, which tracks the greenback’s performance against six major currencies, was trading slightly higher by 0.06% but remained under the crucial 100 mark at 99.46.
