Rupee Strengthens Against US Dollar For Third Day Amid Global Tariff Uncertainties, Easing Inflation

The rupee opened stronger against the US dollar on Wednesday amid softening inflation, as the dollar index slipped and safe-haven assets lost sheen post the unpredictability of policy announcements from Washington.

The Indian unit opened 16 paise higher at 85.61 to the dollar. The rupee closed below the 86-mark to settle at 85.77 against the US dollar on Tuesday.

The country saw retail inflation fall to its lowest since August 2019, led by lower vegetable prices. The consumer price index-based inflation moderated to 3.34% in March, from 3.61% in February.

"India's trade data yesterday showed that the trade deficit grew in the month of March by 50% as exports eased while imports grew," said Amit Pabari, managing director of CR Forex Advisors.

He added that the country managed to do a tad better in overall merchandise exports, which grew by $0.35 billion, while overall total exports, including service exports increased by about $42 billion to $820.93 billion, the highest ever. Imports have, however, increased faster, taking the trade deficit higher than 2023-24 by about $41 billion, he further pointed out.

"Mixed US data adds to uncertainty; traders now focus on US retail sales and Powell's speech. For the rupee, 85.45 acts as a support while 86.00 is a resistance," said Anil Kumar Bhansali, head, treasury and executive director, Finrex Treasury Advisors LLP.

"The RBI is expected to keep a tab on the rupee to ensure the gains are not too big that it hurts the exporters, as it did yesterday at 85.56 levels," said Pabari.

The dollar index was trading 0.39% lower at 99.82 as of 09:02 a.m.

Oil prices have stabilised after a slight dip on Tuesday, hovering below $65 a barrel for Brent crude and over $61 for West Texas Intermediate. This steadiness comes as the market weighs concerns over a potential oversupply and the impact of the ongoing trade tensions between the United States and its major trading partners, particularly China, on the global demand outlook.

Despite the recent stabilisation, crude prices remain near their lowest levels in four years, following a significant drop earlier in the month, triggered by the intensification of trade barriers.

The June future contract of Brent crude was trading 0.31% down at $64.47 a barrel as of 09:02 a.m.