Rupee sees highest single-day gain in over six weeks on tariff relief

The Rupee saw its highest single-day gain in over six weeks, rising 0.45%, on hopes of a possible easing of US tariffs and a sovereign credit rating upgrade

The rupee extended its rally on Tuesday, logging the steepest single-day gain since July 3, amid optimism the US may ease its stance on the punitive tariff on Indian goods, after American President Donald Trump’s meetings with the Russian and Ukrainian leaders.

 

The US had imposed an extra 25 per cent duty on Indian goods, effective August 28, citing New Delhi’s continued purchase of discounted Russian oil. Washington described India’s oil imports as opportunistic and corrosive to global efforts to isolate Moscow.

 

The rupee advanced 0.45 per cent to settle at 86.96 per dollar, the strongest since July 29, compared with its previous close of 87.35.

 

Sentiment was also buoyed by the central government’s proposal to simplify and cut GST rates by scrapping the 12 per cent and 28 per cent slabs, alongside S&P Global’s upgrade of India’s sovereign credit rating to ‘BBB’ from ‘BBB-’. The moves helped the currency strengthen 0.7 per cent over the past two sessions.

 

“The main positive here is the rating upgrade, which has led to FPI buying,” said a foreign exchange dealer at a private bank. “If (Ukraine) peace talks between Russia and the US progress and ties improve, India may not face the additional 25 per cent tariff.”

 

Recent US tariff hikes of as much as 50 per cent on Indian exports had heightened trade frictions, weighed on investor sentiment, and triggered portfolio outflows. But Trump assured Ukrainian President Volodymyr Zelenskyy at a White House summit Monday that the US would guarantee Ukraine’s security as part of any peace deal with Russia.

 

“The rupee outperformed among Asian currencies due to risk-on sentiment,” said Dilip Parmar, senior research analyst at HDFC Securities. “Growth-oriented policies and a credit rating upgrade have bolstered confidence, while foreign fund inflows and a technical pullback strengthened the currency against the dollar.”

 

The rupee was the region’s best performer on Tuesday, followed by the Hong Kong dollar, which rose 0.26 per cent. The Indonesian rupiah was the weakest, falling 0.3 per cent against the greenback.

 

The Indian currency has slipped 1.71 per cent in the current financial year and 1.54 per cent in 2025 so far. In August, it has gained 0.74 per cent against the dollar.

 

Meanwhile, government bonds extended losses as proposed tax cuts revived fiscal concerns and stoked fears of increased debt supply. The yield on the benchmark 10-year climbed to 6.55 per cent before easing to 6.51 per cent, versus 6.50 per cent previously.

 

“Sentiment is down because of supply fears. There are no positive triggers for the bond market,” said a dealer at a private bank. “Some PSU banks bought at the end of the day,” he added.

 

The yield on the 10-year benchmark have risen 22 basis points since the Reserve Bank of India cut its policy repo rate by 50 basis points on June 6. 

 

Equities to surge

 

Equity benchmarks rose on Tuesday, led by Reliance Industries and automakers, on optimism that proposed goods and services tax cuts will boost demand. The NSE Nifty 50 climbed 0.42 per cent to 24,980.65, while the BSE Sensex added 0.46 per cent to 81,644.39.

 

Mid- and small-cap gauges advanced 1 per cent and 0.7 per cent, respectively, with 13 of 16 major sectors ending higher.

 

The gains followed Monday’s near-1 per cent rally after Prime Minister Narendra Modi, in his Independence Day speech, announced sweeping GST reforms.

 

“A GST overhaul will lift incomes across the economy by lowering costs and stimulating consumption,” said Saurav Ghosh, co-founder of investment platform Jiraaf. “Combined with income tax reforms, this will empower Indian households to spend and save more.”

 

Reliance Industries jumped 2.8 per cent after brokerages highlighted multiple growth drivers in its annual report.

 

Foreign Institutional Investors (FIIs) bought equities worth ₹550.85 crore on Monday, according to exchange data. 

 

Reuters & PTI