The Indian Rupee gained strength on Tuesday, bolstered by expected intervention from the central bank and an increase in Asian currencies, as the Dollar weakened to its lowest point against major currencies since November.
The Rupee ended the day at 87.2125 against the greenback, rising by 0.1%.
Earlier in the session, the Rupee had dropped to 87.3850 due to Dollar demand driven by the maturity of positions in the non-deliverable forwards (NDF) market.
Traders noted that probable intervention by the Reserve Bank of India helped curb the Rupee’s losses. Later in the session, the Indian currency gained from the Dollar’s weakness.
The Dollar index, measuring the currency against six major peers, dropped by 0.5% to 103.3, while Asian currencies strengthened, with the offshore Chinese Yuan leading the gains, rising by 0.4% on the day.
“Heightened US policy uncertainty created by President Trump is raising doubts over the US Dollar’s safe haven role alongside the unwinding of popular US tech trades,” said a note from MUFG Bank.
Uncertainty surrounding trade tariffs and their effect on the US growth-inflation balance has dampened market risk appetite, coupled with a significant selloff in US equities.
Concerns about economic growth have also led traders to increase their expectations for rate cuts by the Federal Reserve this year.
Traders are now factoring in 85 basis points of easing from the Fed this year, up from 75 basis points on Monday, according to LSEG data.
Meanwhile, Dollar-Rupee forward premiums increased, with the 1-year implied yield rising by up to 4 basis points to 2.20%, supported by a decline in US bond yields, Reuters news agency reports.
Investors are now awaiting the release of US and India’s consumer inflation data, set for Wednesday. This data is anticipated to impact expectations regarding rate cuts by the central banks of both countries.