The Indian rupee strengthened slightly against the U.S. dollar on Tuesday, with USD/INR edging lower amid a backdrop of steady foreign institutional investor (FII) inflows and renewed optimism surrounding US-India trade discussions. The pair was last seen trading just below recent highs, reflecting a broader softening in the dollar’s momentum.
Investor appetite for Indian assets remains buoyant, bolstered by sustained equity market inflows and improving risk sentiment globally. Analysts note that positive signals from US-India trade talks have provided a tailwind for the rupee, further easing concerns over trade tensions that had weighed on emerging market currencies earlier this year.
However, the move in USD/INR has been modest, as caution lingers ahead of key U.S. economic data due later this week. Traders are closely watching upcoming inflation and retail sales figures, which could influence the Federal Reserve’s next policy steps and, in turn, global currency markets.
On the domestic front, India’s improving economic fundamentals, coupled with resilient foreign exchange reserves, have strengthened the rupee’s appeal. Market participants believe that if FII inflows remain robust, the rupee could continue to outperform its regional peers in the near term.
Still, analysts warn that geopolitical risks and global growth uncertainties could limit further downside in USD/INR. As such, the currency pair is expected to remain range-bound, with volatility likely to pick up ahead of upcoming central bank meetings and trade negotiations.
