Rupee Gains 17 Paise to 85.56 Against Dollar Amid Progress in US-India Trade Talks

Mumbai, July 10: The Indian rupee gained 17 paise to trade at 85.56 against the US dollar in early Thursday trade. This appreciation was primarily driven by modest progress in US-India trade negotiations and the short-term relief provided by extended tariff deadlines.

At the interbank foreign exchange market, the local currency opened at 85.62 and strengthened to an early high of 85.56, improving from its Wednesday’s closing level of 85.73. Despite this uptick, trading remained confined to a narrow and volatile range as investors awaited more concrete developments from the ongoing bilateral trade talks.

US Tariff Extension Fuels Sentiment

Market sentiment received a boost after the United States extended the deadline for a 26% reciprocal tariff on select Indian exports from July 9 to August 1. While a 10% baseline tariff remains in effect, India’s exclusion from the latest list of countries receiving tariff hike letters helped shore up confidence in the rupee. This extension provides a crucial window for both nations to finalise an interim trade pact.

The Trump administration has so far issued tariff notices to about 20 nations, but India has not been included in this specific round, as both countries continue to negotiate an interim trade agreement. Reports indicate that India and the US are “close to signing a trade deal,” with sensitive sectors like dairy and agriculture likely to be excluded from the initial agreement to facilitate its conclusion.

Trade and Oil Impact in Focus

India’s trade relationship with the US remains robust. In FY 2024-25, bilateral goods trade stood at USD 131.84 billion, with India recording a significant trade surplus of USD 41.18 billion. Exports amounted to USD 86.51 billion, while imports totalled USD 45.33 billion. This healthy trade balance with its largest trading partner provides underlying support for the rupee.

However, rising crude oil prices pose a potential headwind for the Indian currency. Brent crude edged down 0.03% to USD 70.17 per barrel in futures trade, after touching USD 70 levels. “For a net oil importer like India, the increase in crude prices could strain the trade balance and add pressure on the rupee,” noted Pabari, Managing Director at FX advisory firm CR Forex.

India imports a significant portion of its crude oil requirements, making its economy and currency vulnerable to global oil price fluctuations.

Global Cues and Equity Movement

The dollar index, which measures the greenback against six major currencies, dropped 0.19% to 97.37. A weaker US dollar generally makes imports cheaper for other countries and can lead to capital inflows into emerging markets, thereby aiding the rupee’s recovery.

Meanwhile, domestic equities witnessed minor declines in early trade. The BSE Sensex fell 113.57 points to 83,422.51, while the NSE Nifty slipped 37 points to 25,439.10.

Foreign institutional investors were net buyers, investing ₹77 crore in domestic equities on Wednesday, according to exchange data. This renewed FII interest, alongside domestic institutional buying, could provide some cushion to the market.

What’s Ahead?

The near-term outlook for the rupee hinges on progress in US-India trade talks and global risk sentiment. If an interim trade deal materialises, it could further strengthen the rupee by boosting investor confidence and easing tariff pressures. However, rising crude oil prices and global uncertainty around US tariffs remain key risks. The rupee may trade in a tight range until clarity emerges on the trade pact and oil stabilises. Sustained FII inflows and a weaker dollar could support modest appreciation, but volatility is likely to persist.

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