A dip in global crude oil prices and a slight weakening of the US dollar helped the Indian rupee rise 18 paise to 90.12 against the US dollar in early trade on Tuesday.
However, US President Donald Trump’s latest remarks that included threats of increasings tariffs on India, FII outflows, and sustained weak sentiments at the domestic equity markets capped sharper gains in the rupee, according to forex traders.
At the interbank foreign exchange, the domestic unit had opened at 90.22 against the US dollar and rose further to 90.12, up 18 paise from its previous close.
On Monday, the rupee stayed weak for the fourth straight session and closed 10 paise lower at 90.30 against the US dollar, as the world remained gripped by renewed geopolitical tensions, bolstering the US dollar’s appeal.
Trade analysts say the current political and economic environment may lead the rupee back to 91-levels, especially with diminished chances of a US-India trade deal happening any time soon.
“Trump threatened India with more tariffs if India did not toe the line of not buying oil from Russia. The rupee continues to be hampered by the threats. There is a good chance for the rupee to go back to 91 levels with the trade deal not happening in near future,” said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.
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Last week, the US carried out a military operation in Venezuela and deposed President Nicolas Maduro, with Trump saying his country would “run” the South American nation and tap its vast oil reserves to sell to other nations.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.04 per cent higher at 98.22.
Bhansali also attributed the dollar’s weakening to lower US ISM Manufacturing PMI.
“The US dollar index fell to 98.31 levels after the US ISM Manufacturing PMI came lower than expected at 47.9, giving market indication of rate cuts due to a weakening economy,” he added.
Brent crude, the global oil benchmark, was trading 0.31 per cent lower at USD 61.57 per barrel in futures trade.
On the domestic equity market front, the 30-share benchmark index Sensex declined 431.95 points to 85,007.67 in early trade, while Nifty was down 105.6 points to 26,144.70.
Foreign institutional investors offloaded equities worth ₹36.25 crore on Monday, according to exchange data.
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