The rupee closed at 85.7725 against the dollar, up 0.3%. The currency touched a peak of 85.59 before trimming gains in the face of importer hedging demand.
India’s benchmark equity indexes, BSE Sensex and Nifty 50, ended higher by over 2% each.
The indexes have erased all of their losses since the announcement of U.S. tariffs on April 2, outperforming their regional peers.
There was a “lot of custodial (dollar) selling,” which helped the rupee out, a salesperson at a foreign bank said. Broad-based dollar offers also picked up on the back of the likely inflows, the salesperson said.
Other Asian currencies were mostly lower, while the dollar index continued to hover near its lowest levels since April 2022 with constant shifts in U.S. trade policies denting its appeal. While smartphones and other electronics have been exempted from “reciprocal tariffs,” comments from U.S. President Donald Trump suggested that the reprieve is likely to be short-lived. “Markets retain a substantial risk premium attached to U.S. assets, including the dollar,” ING Bank said in a note.
The greenback has declined 8% this year, battered by concerns of a slowdown in the U.S. economy and as investors pulled out from U.S. assets following the announcement of sweeping tariffs.
While a broadly weaker dollar has aided emerging market currencies, traders reckon that volatility is set to persist amid near-constant shifts in U.S. trade policy.
The dollar-rupee’s 1-month realised volatility and the 1-month implied volatility are both perched near two-year highs.
Meanwhile, India’s merchandise trade deficit in March stood at $21.54 billion, higher than the $16 billion anticipated by economists in a Reuters poll.
