Rupee Jumps Over 1% to 90.4 After India-US Trade Deal Lifts Market Sentiment
- 3rd February 2026
- 12:15 PM
- 3 min read
Summary
The Indian rupee recorded its sharpest single-day gain in over three years on Tuesday, strengthening past the 90.4 level against the US dollar after India and the US announced a trade deal cutting American tariffs on Indian goods from 50% to 18%, triggering a broad risk-on rally across markets.Mumbai | February 3, 2026
The Indian rupee surged more than 1% in early trade on Tuesday, rising to around 90.30 per US dollar after India and the United States announced a new trade agreement late Monday.
The rupee gained nearly 119 paise in early trade, opening around 90.30 per dollar compared with its previous close of about 91.49, as market sentiment improved sharply following the announcement.
The agreement, announced by US President Donald Trump and Prime Minister Narendra Modi, includes an immediate reduction in US reciprocal tariffs on Indian goods to 18%, easing a major source of policy uncertainty that had weighed on Indian assets through much of last year.
Strongest Rupee Session Since 2022
Tuesday’s move marked the rupee’s strongest single-session performance since November 2022. The currency had recently touched record lows near 92 per dollar and had underperformed most of it’s peers amid persistent foreign institutional investor (FII) outflows and global dollar strength.
Traders said the sharp rebound reflected improved confidence in India’s external outlook following the tariff cut, which reduces pressure on exports and trade flows.
The tariff reduction is also expected to support India’s external balances by improving export competitiveness.
Equities Rally, Risk Appetite Improves
The rupee’s strength came alongside a powerful rally in domestic equities, with benchmark indices opening sharply higher amid aggressive short covering. Market participants said foreign investors rushed to unwind bearish positions after weeks of heightened volatility.
Bond markets also reflected the improved sentiment, with government bond yields easing modestly in early trade.
Short Covering Drives Momentum
Dealers attributed part of the rupee’s sharp appreciation to short covering, as the Indian currency had been one of the worst-performing Asian currencies over the past year, making it vulnerable to a sharp reversal once sentiment turned.
Exporter dollar selling and reduced demand for safe-haven assets further supported the move, traders said.
What Markets Will Watch Next
Analysts cautioned that sustaining rupee strength will depend on follow-through in foreign inflows, export performance and global dollar trends. Markets will also track implementation details of the trade agreement and any further signals on trade and capital flows.
For now, the India-US trade deal has delivered a decisive confidence boost to Indian markets after weeks of sharp swings.
For more market and macro updates, follow PL Capital.
