The Indian rupee edged higher on Tuesday, supported by a weaker U.S. dollar and improved market sentiment ahead of a potential India–European Union trade agreement.
Reuters reported that the rupee strengthened 0.13% to 91.8225 against the dollar by 10:50 a.m. IST, paring some losses after touching a record low of 91.9650 last week.
Despite the day’s gains, the currency remains under pressure due to continued foreign investor outflows. Market participants also pointed to delays in the India–U.S. trade agreement and broader geopolitical concerns, including tensions involving the United States and Greenland, as factors weighing on sentiment.
Persistent weakness in foreign capital inflows has kept the rupee under strain. Importers have remained active in hedging against further depreciation, while exporters have held back on dollar sales, leading to an imbalance in currency flows.
On Tuesday, however, the rupee found support as the dollar index hovered near a four-month low. Expectations of an announcement on the conclusion of India–EU trade negotiations later in the day also reduced bearish bets against the currency.
Speaking to Reuters, a trader at a state-run bank said, “Speculators will be wary and the Reserve Bank of India, too, is unlikely to allow a record low on the day a deal may be announced.” “That said, gradual rupee depreciation will persist and 92.50 seems to be the immediate support (for INR),” the trader added.
Equity Markets Rise
Indian equity markets also traded slightly higher, reflecting optimism around the potential trade deal. The BSE Sensex and the Nifty 50 were both up around 0.1% in early trade.
Additional support came from comments by U.S. Treasury Secretary Scott Bessent, who on Friday indicated that the United States may remove an additional 25% tariff on India following a sharp reduction in India’s imports of Russian oil.
Forex traders said remarks by U.S. President Donald Trump at Davos further improved sentiment. Trump confirmed that a framework for a future Greenland agreement had been reached and said tariffs scheduled for February 1 would not be implemented.
For the rupee, “the 92.00 level remains the key near-term pivot. A sustained break above this zone could open the door toward 92.20–92.50,” said Amit Pabari, managing director at FX advisory firm CR Forex, according to Reuters.
“However, consistent RBI intervention may help stabilise the currency and gradually pull USD/INR back toward the 90.80–91.00 range in the near term.”
India remains heavily dependent on imports, meeting about 85% of its crude oil needs from overseas. Its import basket includes crude oil, coal, plastics, chemicals, electronic goods, vegetable oil, fertilizers, machinery, gold, pearls, precious and semi-precious stones, and iron and steel.
Explainer
A comprehensive report by The Times of India explains that a weaker rupee raises the cost of imports. It makes fuel, electronic goods such as mobile phone components, certain automobiles, and household appliances more expensive. Overseas education also becomes costlier as the currency depreciates.
Exporters, on the other hand, benefit from a weaker rupee as they earn more in local currency terms. However, exporters that depend heavily on imported raw materials may see these gains reduced due to higher input costs. Sectors with low import dependence, such as textiles, stand to gain more, while import-intensive sectors like electronics benefit less, the report said.
According to the latest data, India’s imports rose 8.7% to $63.55 billion in December 2025. The trade deficit widened to $25.04 billion, compared with $24.53 billion in November 2025 and $22 billion in December 2024.
Meanwhile, think tank Global Trade Research Initiative (GTRI) said India must carefully balance economic growth with inflation control, while reassessing its rupee management and trade policies to ensure long-term economic stability.
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