The rupee appreciated 74 paise to 84.62 against the US dollar in early trade on Tuesday, supported by optimism from easing of tensions between India and Pakistan as well as the US-China trade deal. Forex traders said continued foreign investor interest in Indian assets lent fundamental support to the local unit.
India and Pakistan on last Saturday announced reaching an understanding to stop all firings and military actions on land, air and sea, with immediate effect.
At the interbank foreign exchange, the domestic unit opened at 84.70 and fell to an early low of 84.74 and a high of 84.62 against the greenback, registering a gain of 74 paise over its previous close.
On Friday, the rupee pared its initial losses and settled for the day higher by 22 paise at 85.36 against the US dollar.
The foreign exchange market was closed on Monday on account of Buddha Purnima.
In his first address to the nation after Operation Sindoor, Prime Minister Narendra Modi on Monday sternly warned Pakistan that India will not succumb to nuclear blackmail and sent a clear message to the world: terror and trade, terror and talks cannot go together.
"Operation Sindoor is India's new policy against terrorism and our unwavering pledge for justice. It is the new normal. We have only kept in abeyance our operations against Pakistan, and the future will depend on their behaviour," Modi said.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 20 per cent at 101.58.
The dollar index rose over 1.30 per cent on Monday, driven by the US-China trade agreement, where both sides significantly reduced tariffs.
Combined with the already signed US-UK trade deal, traders are now pricing in only two rate cuts this year, pushing bond yields higher, which supported the dollar Index.
"US tariffs on Chinese goods dropped from 145 per cent to 30 per cent, and China's tariffs on US goods fell from 125 per cent to 10 per cent. This lifted optimism around the US economy as trade war tensions cooled," CR Forex Advisors MD Amit Pabari said.
Brent crude, the global oil benchmark, fell 0.22 per cent to USD 64.82 per barrel in futures trade.
Over the last few sessions, Brent crude prices have surged to near USD 65 per barrel, which could widen India's trade deficit, Pabari added.
"From a technical perspective, the USDINR pair remains in a downtrend, and every uptick is likely to present a selling opportunity. For now, the pair is expected to trade within a range of 84.50-85.10," he noted.
In the domestic equity market, the 30-share BSE Sensex declined 902.68 points, or 1.10 per cent, to 81,527.22, while the Nifty fell 207.15 points, or 0.83 per cent, to 24,717.55.
Foreign institutional investors (FIIs) bought equities worth Rs 1,246.48 crore on a net basis on Monday, according to exchange data.
Source Name : Economic Times