Rupee hits three-week high of 86.93 against US dollar amid Trump tariffs: What’s supporting the domestic currency? | Stock Market News

INR vs USD rate today: The Indian rupee logged its best single-day session in three weeks (since February 11, 2025) and stayed firm for the third straight session on Wednesday, March 5, after a broadly weaker US dollar amid US President Donald Trump’s tariff updates spurred gains in Asian currencies. 

Global investors are fretting over a slowdown in the US and weigh the impact of trade tariffs on the world’s largest economy. The domestic currency settled with a gain of 13 paise at 87.06 against the US dollar, driven by a sharp recovery in domestic equities, a weak American currency and weak crude oil prices. 

Forex traders said Donald Trump’s tariff escalation has triggered a chain reaction in global markets, sending the US dollar into a downward spiral. During the session, traders pointed to dollar sales from foreign and state-run banks, which helped lift the rupee alongside a markedly softer US dollar.

Also Read: Rupee logs biggest single-day drop in 3 weeks: Is the domestic currency poised for further weakness? Experts weigh in

US tariffs trigger global trade war concerns

Trump criticised the high tariffs charged by India and others, terming them “very unfair.” He announced reciprocal tariffs on nations that impose levies on US goods from April 2. In his first speech before US lawmakers since taking office, Trump said in an address to the Joint Session of Congress that the actions are aimed at balancing years of trade imbalances.

Trump is implementing a 25 per cent additional tariff on imports from Canada and Mexico and a 10 per cent additional tariff on imports from China. In a retaliatory action, Canada said that effective March 4, 2025, it is imposing 25 per cent tariffs on $30 billion in goods imported from the US.

Mexico said it will announce reciprocal actions on Sunday. China also announced it will impose additional tariffs of up to 15 per cent on imports of key US farm products. Stubborn inflation and Donald Trump’s trade policies have rekindled fears of stagflation in the world’s largest economy, with analysts warning against complacency towards Trump’s policies.

Also Read: RBI to conduct OMO purchase auctions, rupee-dollar swaps worth ₹1.9 trillion for India’s liquidity boost

INR vs USD Today: What’s supporting the domestic currency?

At the interbank foreign exchange, the rupee witnessed high volatility. It opened at 87.18, then touched the intraday high of 86.93 and a day low of 87.20 against the greenback. The local unit ended the session at 87.06 against the dollar, registering a gain of 13 paise from its previous closing level.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell nearly 0.6 per cent to 104.9, its weakest level since November 2024, pressured by a sharp rise in the euro currency, which was hovering at a near four-month peak, against the greenback. 

The global oil benchmark Brent crude fell 0.75 per cent to $70.51 per barrel in futures trade. Concerns about the US growth outlook and uncertainty about the growth-inflation impact of trade tariffs have weighed on the US dollar and US bond yields over recent sessions after the US government imposed reciprocal tariffs on Mexican, Chinese, and Canadian imports.

Also Read: Trump tariffs impact: Rupee emerges worst-performing Asian currency YTD ahead of RBI MPC’s interest rate verdict

“The rupee strengthened for the third consecutive day, aligning with regional currencies as risk assets surged, while the safe-haven dollar weakened due to falling US Treasury yields. Expectations of rate cuts, driven by decreasing inflation and concerns over economic growth, bolstered the momentum. In the near term, the spot USD/INR has support at 86.42 and resistance at 87.55,” said Dilip Parmar – Senior Research Analyst at HDFC Securities.

In the domestic market, the 30-share BSE Sensex surged 740.30 points, or 1.01 per cent, to settle at 73,730.23, while the Nifty 50 index advanced 254.65 points, or 1.15 per cent, to close at 22,337.30 points. Foreign institutional investors offloaded equities worth ₹2,895.04 crore on a net basis on Wednesday.

On the domestic macroeconomic front, India’s services sector activity witnessed a sharp uptick in February, boosted by improving domestic and international demand. This resulted in a quicker expansion in output and a substantial increase in employment, a monthly survey said on Wednesday.

Also Read: Why can’t Donald Trump’s tariff policy dictate Indian stock market for long? EXPLAINED

Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, said, “Rupee traded strongly positive as domestic markets saw strong recovery supported by strong domestic inflows countering the persistent foreign sell-off with an expected weak number on selling side.”

“Global trade tariff changes continue to create uncertainty, but domestic investments in domestic-oriented sectors after heavy selling provided some stability. Additionally, soft crude oil prices offered further support to the rupee. Tariff updates will keep markets volatile. The rupee range is expected between 86.55 and 87.35,” added Trivedi.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.