Rupee claws back from early weakness to end higher against dollar

dollar index weakened to a six-month low of 101.5. The local unit opened weaker at 85.77, but gained during the day to end stronger, traders said.

“The safe haven status of the dollar seems to be diminishing due to concerns about how trade policy may impact growth in the US,” a trader in a private bank said. The weakness helped strengthen the rupee, he said.

President Donald Trump on Wednesday announced 26% tariffs on US imports from India effective April 9.

“The dollar index is now open to test 100.60 levels. For India, the tariffs seem to be still moderate as compared to other Asian economies who act as major rivals to India when it comes to exports. Thus, the rupee only saw a knee jerk depreciation at the beginning and later started appreciating,” said Shinhan Bank India forex and rates treasury head Kunal Sodhani.

Inflows into Indian debt also helped in strengthening of the rupee, while mild dollar sales from oil companies added pressure. The Reserve Bank of India was likely absent, or only mildly present, during the day on either side of the trade, dealers said.

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“Oil companies bought dollars when the rupee touched the 85.50/$1 level, mildly weakening the currency, but the losses were recovered later during the day. Inflows in debt helped the currency,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

Traders expect the rupee to move in a range of 85.00 to 85.70 in near term. “For the rupee, 84.80 now is an important support while 85.85 is a major hurdle to cross,” Sodhani