Rupee Opens Stronger on Ceasefire and US-China Trade Truce

The Indian rupee surged in early trade on Tuesday, opening at 84.62 against the US dollar - 75 paise stronger than Friday’s close of 85.37 - as easing geopolitical tensions and a softening global trade backdrop buoyed investor sentiment. Currency markets were shut on Monday for Buddha Purnima.

The rebound follows a breakthrough ceasefire agreement between India and Pakistan over the weekend after four days of cross-border hostilities had threatened to escalate into a broader conflict. The truce brought immediate relief to financial markets, with Indian equities rallying nearly 4% on Monday in their best session in four years.

Adding to the momentum was a surprise trade détente between the United States and China. Both countries agreed to significantly scale back tariffs after two days of talks. The US reduced duties on Chinese imports from 145% to 30%, while Beijing slashed its own tariffs to 10% on most goods. The development sparked a global risk-on rally, lifting Asian equities and strengthening the yuan to a six-month high.

The dollar index, which had surged nearly 1.5% on Monday in response to improving sentiment, eased slightly to 101.62 in early Tuesday trade.

With a firmer global backdrop and reduced geopolitical overhang, currency traders see room for further appreciation in the rupee, which had lost 0.9% last week amid the India-Pakistan standoff.

All eyes now turn to domestic macro data. India’s consumer inflation print for April, due later today. The figure will be closely watched for cues on monetary policy. Meanwhile, the Reserve Bank of India is scheduled to purchase ₹25,000 crore worth of bonds on Thursday, followed by a government bond auction of the same size on Friday.

Globally, upcoming US inflation and retail sales data will be critical in shaping expectations around the Federal Reserve’s next policy move.

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