Rupee Set for Further Gains as Trade Deal Boosts Sentiment, Says Bank of America
The Indian rupee is expected to strengthen further by the end of March after a trade agreement with the United States triggered its sharpest single-day rally in more than seven years, according to Bank of America. Vikas Jain, the bank’s head of India fixed income, currencies and commodities trading, said the currency could appreciate to the 88.60–89.00 per dollar range, improving on the lender’s earlier forecast of 90.50–91.00. His comments came in an interview with Reuters following a surge in the rupee earlier this week.
The rally followed an announcement by U.S. President Donald Trump that tariffs on Indian goods would be reduced to 18% from 50%, easing a major source of uncertainty for markets. The rupee jumped 1.4% on Tuesday to 90.2650 per dollar — its biggest daily gain since December 2018 — after having touched a record low near 91.99 earlier this year amid foreign portfolio outflows. Traders said persistent uncertainty over trade ties had pressured the currency in January, when overseas investors sold roughly $4 billion worth of Indian equities.
Jain noted that easing outflows and a likely rise in exporters’ hedging activity could offer additional support to the rupee. He also downplayed the prospect of aggressive dollar purchases by the Reserve Bank of India if foreign inflows resume. Although the RBI sold nearly $30 billion during September–November, India’s foreign exchange reserves recently climbed to a record $709 billion, aided by rising gold prices and FX swap impacts. If the rupee stabilizes near current levels, Jain said, the central bank may limit intervention to rolling over forward positions rather than large-scale market operations.
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