The Indian rupee strengthened against the US dollar in early trading on Tuesday, opening at 87.35, a gain of 13 paise from its previous close of 87.48 on Monday. This comes after a volatile trading session on Monday, where the rupee touched a record low at open before recovering.
The rupee had weakened significantly on Monday, reaching 87.92 against the dollar, following fresh threats of tariffs on steel and aluminum imports. The US administration’s announcement of a 25% tariff on these imports, coupled with hints of further action on other goods, had triggered a flight to safety, boosting the dollar.
However, the rupee managed to recover most of its losses later in the day, due to strong intervention from the Reserve Bank of India. Market participants also cited dollar selling by exporters and profit-booking by speculators as factors contributing to the rupee’s recovery. The currency eventually closed the day at 87.48.
“The rupee weakened to 87.95 against the dollar before closing at 87.4750. However, the unit managed to pare most of its losses due to strong central bank intervention, exporters’ selling dollars and profit-booking by speculators, who were holding long Rupee-dollar positions,” said Kunal Sodhani of Shinhan Bank.
Looking ahead, market analysts expect continued volatility in the currency markets. “With a rise in the dollar index and a fall in Asian currencies due to the imposition of tariffs, the Indian rupee is set to open weaker,” noted Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, before Tuesday’s market opening.
“The rupee was allowed to fall up to 87.9575, its lowest level till date, before RBI stepped in. Importers covered this dip on the dollar. Today, the range of 87.40 to 87.80 should be honoured, as volatility in the currency increases,” he added.
Bhansali also suggested that exporters may wait and watch market movements before making decisions, while importers should buy on dips.
. Read more on Economy & Finance by NDTV Profit.This comes after a volatile trading session on Monday, where the rupee touched a record low at open before recovering. Read MoreEconomy & Finance, Markets, Notifications
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