Rupee breaches 86 per dollar level on US President Trump's tariff relief

The dollar index was trading a tad lower at 99.70, against the previous close of 99.75

The rupee appreciated past the 86-per-dollar mark on Tuesday, settling 27 paise stronger against the greenback on optimism around US President Donald Trump’s tariff relief. The local currency settled at 85.77 per dollar, compared to the previous close of 86.04 per dollar.

 

The dollar index was trading a tad lower at 99.7, compared to the previous close of 99.75. It measures the strength of the US dollar against a basket of six major currencies.

 

The rupee appreciated to as much as 85.59 per dollar during the day (according to Bloomberg data); however, it gave up some gains by the end of trade on likely Reserve Bank of India (RBI) intervention via dollar purchases.

 

 

“Indian rupee again rose on Tuesday as the dollar index was down below 100 and (dollar) inflows dominated outflows. Reserve Bank of India (RBI) seems to have been present at 85.56 levels, which was the high for the rupee, as it fell to 85.85 before closing at 85.77. As the dollar falls, the rupee is set to gain within a broad range of 84.5 to 86.5. RBI may recoup its reserves, while the dollar index looks oversold and could bounce back on some positive news coming from tariffs,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

 

Meanwhile, government bond yields fell to a 40-month low, levels last seen on December 17, 2021, as the RBI announced another set of long-term liquidity infusion tools, said dealers. The benchmark yield settled at 6.41 per cent, compared to the previous close of 6.44 per cent. 

 

“The active liquidity infusion is a positive for the market; they (RBI) are delivering what they promise,” said a dealer at a state-owned bank. “We stand by our estimate of 6.25 per cent (yield on the benchmark bond) by June-end,” he added.

 

The RBI announced on Friday that it will conduct an open market operation (OMO) auction on April 17 to purchase government securities worth ₹40,000 crore. This auction comes in addition to the previously announced ₹80,000 crore OMO programme, which is being conducted in four tranches of ₹20,000 crore each — April 3 and April 8 already done, and on April 22 and April 29.

 

The central bank will also conduct a long-term 43-day variable rate repo (VRR) auction on the same day to infuse ₹1.5 trillion into the banking system.

 

The RBI has infused ₹2.9 trillion via OMO auctions so far. It has also infused ₹2 trillion via long-term VRR auctions.