INR: Indian rupee logs biggest one-day gain in over a month

MUMBAI: The Indian rupee (INR) logged its biggest one-day gain in more than a month on Tuesday as the dollar dipped towards a one-week low, boosting regional currencies, while foreign banks’ dollar sales also helped.

The Indian rupee closed up 0.1% at 85.7125 against the U.S. dollar, its strongest daily gain since late-November.

The dollar index fell 0.3% to 107.9, while other Asian currencies rose between 0.2% and 0.9% as traders pondered whether U.S. President-elect Donald Trump’s trade tariffs would not be as aggressive as anticipated.

A report by the Washington Post on Monday said Trump’s aides were exploring tariff plans that would apply to every country but only cover certain sectors deemed critical to national or economic security, prompting a slump in the dollar.

Trump later denied the report in a post on his Truth Social platform, helping the dollar trim some of its decline.

The dollar’s failure to recover losses “likely indicates two factors: first, the market had been heavily favouring the dollar following a nearly continuous three-month rally; second, a view that there is no smoke without fire,” ING Bank said in a note.

Dollar sales from at least two large foreign banks also helped the rupee, a trader at a bank said.

But relief for the local unit is likely to be temporary amid growing anticipation of weakness among speculators and hedgers, indicated in market activity data covering options and forwards.

India’s benchmark equity index Nifty 50’s return below the 200-daily moving average, a key technical indicator, “could spell more trouble for the rupee,” Societe Generale said in a note.

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The Nifty rose on Tuesday after a slump in the previous session, but remained below the 200-day average after a brief recovery last week.

“It remains to be seen if anticipated passive inflows into index-eligible (FAR) government bonds will stem the depreciation,” the note said.