The Indian rupee recorded its largest one-day gain in over a month. The U.S. dollar dropped towards a one-week low, supporting regional currencies. Additionally, foreign banks’ dollar sales contributed to the rupee’s rise.
The rupee ended the day at 85.7125 against the U.S. dollar, marking a 0.1% increase. This was its strongest gain since late November.
The dollar index fell by 0.3% to 107.9. Meanwhile, Asian currencies saw gains ranging from 0.2% to 0.9%. Traders speculated that U.S. President-elect Donald Trump’s trade tariffs might not be as severe as expected.
A Washington Post report on Monday revealed that Trump’s aides were considering tariff plans targeting certain sectors critical to national security. This caused the dollar to weaken. Trump later denied the report, helping the dollar recover slightly.
According to ING Bank, the dollar’s struggle to regain lost ground reflects two factors: a strong market preference for the dollar after a three-month rally and lingering doubts about Trump’s tariff plans.
The rupee’s boost was further supported by dollar sales from two major foreign banks, a trader noted.
However, experts caution that this relief may be short-lived. Speculators and hedgers are anticipating a weaker outlook, as shown by options and forwards market activity.
Concerns are also rising over India’s benchmark equity index, Nifty 50, which fell below its 200-day moving average, a critical technical indicator. Societe Generale warned that this could lead to further pressure on the rupee.
The Nifty 50 saw a recovery on Tuesday, but remained below the 200-day average after a brief bounce last week. Experts are uncertain whether expected inflows into government bonds will help stabilize the rupee.
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