USD vs INR: Rupee rallies 119 paise to 90.30 as US cuts tariffs on India

USD vs INR: The Indian rupee strengthened sharply in early trade on Tuesday. The move followed a decision by the US to cut tariffs on Indian goods to 18 per cent. The change improved sentiment around India’s trade outlook and capital flows.

The rupee appreciated 119 paise to 90.30 against the US dollar in early trade. It had closed at 91.49 in the previous session.

At the interbank foreign exchange market, the domestic currency opened strong at 90.30. The move marked one of the sharpest single-day gains in recent sessions.

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Trade deal drives sentiment

Forex traders said the US-India trade deal changed the market narrative.

The US President spoke with the Indian Prime Minister on Monday and announced the trade agreement. Following the comments, US equity markets strengthened. This supported the dollar index and improved global risk sentiment.

Dollar index remains volatile

According to Manoj Kumar Jain, Prithvi Finmart, the dollar index remains highly volatile.

He said the dollar index settled higher at 97.45 on Monday, gaining 0.61 per cent. The index extended gains after the US-India trade deal announcement and the nomination of a new US Federal Reserve Chairman.

Jain expects the dollar index to remain volatile this week amid global market uncertainty and geopolitical tensions. He sees the index trading in the range of 94.85 to 98.55.

Rupee supported by domestic cues

On the domestic front, the rupee gained support from policy measures announced in the Union Budget.

Jain said the rupee benefited after the finance minister announced a tax holiday for large data centre companies till 2047. The move is aimed at attracting foreign exchange inflows.

Recovery in domestic equity markets and easing trade concerns also supported the rupee.

He expects the rupee to remain volatile this week and trade in the range of 89.80 to 93.40.

Technical view on USD-INR

The USD-INR February 25 futures contract settled weaker at 91.6525 on the NSE, down 0.42 per cent.

On daily charts, the pair is trading below its moving average trend-line support of 91.78. The RSI is above 60 levels, indicating strength, while the MACD shows a positive crossover.

Support is seen at 91.35 to 91.08. Resistance is placed at 92.20 to 92.25.

Jain suggests selling USD-INR below 91.35 with a stop loss at 91.85, targeting levels of 90.80 and 90.55.

Madhavi Arora, Lead Economist at Emkay Global Financial Services, said the rupee has borne the brunt of tariff-related uncertainty.

She noted that the INR has been among the worst-performing Asian emerging market currencies this year. The pressure created a negative feedback loop across rates, equities, and policy expectations.

Arora said some of the recent noise could fade and lead to partial reversal of capital outflows. However, she added that a significant part of the outflows came from FDI repatriation, mainly private equity exits, and not just foreign portfolio investors.

She cautioned that stress in the rates market is structural and may persist even if the rupee sees a mild rally, especially as the RBI approaches the end of its rate easing cycle.