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India-US Tariff Cut Lifts Rupee, Easing Investor Concerns on Trade Barriers
The Indian Rupee strengthened by 1.2% to 90.40 against the US dollar on Tuesday following the announcement of a revised India-US trade deal. US President Donald Trump confirmed a tariff cut on Indian goods from 25% to 18%, lifting investor sentiment and easing long-standing concerns over high trade barriers. Bloomberg reported this as the strongest rise in the rupee in over three years.
Investor Confidence Boosted by Reduced Tariffs
The deal addresses tariff-related uncertainties that had weighed heavily on the rupee in 2025, when it depreciated nearly 5% and slid more than 2% in January alone. Foreign investors and importers had limited capital inflows due to strong dollar demand. “The trade deal removes a major overhang that had weighed on capital flows. Sentiment-driven demand for the INR has strengthened,” said Kunal Sodhani, Head of Treasury, Shinhan Bank India.
Key Highlights of the India-US Trade Agreement
The agreement includes India’s commitment to stop Russian oil purchases and ease restrictions on US exports. Divam Sharma, Co-Founder and Fund Manager at Green Portfolio PMS, noted, “With valuations corrected and fundamentals rock-solid, this should draw FIIs back to Indian markets in the short term.”
Analysts have stated that the deal has reduced geopolitical risks significantly, encouraging renewed investor interest in Indian assets.
Rupee Outlook: Can Further Gains Follow?
The experts believe that the future movement of the rupee will be determined by three factors, which include oil prices, global monetary conditions, and India's macroeconomic performance. Sodhani suggested the broader USD-INR range may remain between 89.60–91.40, while Anuj Gupta expects further appreciation, forecasting near-term levels of 89.50–89.00 due to rising exports and improved market confidence.
Conclusion: Market Implications for the Indian Rupee
The India-US trade deal has provided a strong boost to the rupee and Indian equities, reversing a period of weakness. The effects of tariff reductions and renewed foreign investment interest become evident through comparisons with 2025.
Analysts suggest that macroeconomic indicators and global conditions require observation as the rupee could sustain gains if trade optimism and capital inflows continue in the coming months.