3 min readMumbaiUpdated: Feb 3, 2026 08:50 PM IST
The rupee rallied 1.36 per cent, logging its best single-day gain since December 2018, on Tuesday, buoyed by positive investor sentiment over India-US bilateral trade deal. On Monday, US President Donald Trump announced the deal, under which Washington will reduce the reciprocal tariffs on Indian goods to 18 per cent from the current 50 per cent.
The domestic currency appreciated 124 paise to close at 90.27 against the US dollar compared to the previous close of 91.51.
“The Indian rupee staged a historic rally today, securing its highest single-day gains since December 18, 2018. This surge comes on the heels of a long-anticipated US-India trade agreement, a breakthrough that has effectively dissipated the fog of geopolitical uncertainty that weighed on the currency for months,” Dilip Parmar, Research Analyst, HDFC Securities.
The agreement has significantly improved sentiment as expectations of stronger trade flows and potential inflows from foreign investors have boosted confidence in the domestic currency.
In August last year, US President Donald Trump hiked the tariffs on Indian goods to 50 per cent, comprising 25 per cent reciprocal tariffs and an additional 25 per cent linked to India’s purchase of Russian oil.
The rupee remained weak for a majority part of 2025 amid concerns over higher reciprocal tariffs on Indian goods imposed by the US, continued outflows from foreign portfolio investors (FPIs) and delay in the India-US trade deal. The local currency depreciated around 5 per cent in 2025. In 2026 so far, FPIs have offloaded Rs 34,056 crore worth of domestic shares on a net basis, adding to Rs 1.66 lakh crore sold in 2025.
“The Indian rupee has remained relatively weak versus Asian peers, reflecting its use as a policy buffer during recent trade tensions with the US. With inflation contained, currency weakness could be tolerated without significant imported inflation, leaving the rupee trading at a valuation discount driven largely by risk perception,” said Anindya Banerjee, Head Currency and Commodity Research, Kotak Securities.
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“The recent trade agreement and tariff reduction to 18 per cent open the door for modest appreciation, but the pace and extent will depend on RBI intervention thresholds, given the priority of maintaining export competitiveness,” he said.
According to Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, the immediate resistance for the rupee is seen around 89.90, while 90.50 now acts as an important base support.
“As long as the rupee sustains above the 90.50 zone, overall bias remains positive, with appreciation likely to continue if global risk sentiment remains stable and capital inflows strengthen,” he said.
HDFC Bank’s economists expect rupee to trade in a range of 89-91.50 over the quarter, supported by the positive trade deal announcement and improvement in seasonal capital inflows.
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For FY27, they estimate a range of 90-92 for the USD/INR pair, factoring in a moderate pace of depreciation.
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