Rupee set for single biggest gain since December 2018, up 1.3% at 90.22

The local currency closed at 91.5363 on Monday

The Indian rupee was set for its biggest single day gain since mid-December 2018 on Tuesday after a late-night trade deal announced by both Prime Minister Narendra Modi and United States President Donald Trump ignited investor optimism and spurred foreign inflows. The rupee appreciated 1.3% to touch 90.22 per dollar.

The local currency closed at 91.5363 on Monday. The rupee had gained about 48 paisa in the previous trading session to hit a two-week high after the Reserve Bank of India supposedly intervened in the spot market.

US President Donald Trump on February 2 announced a trade deal with India that includes a significant reduction in reciprocal tariffs on Indian goods, lowering the rate from 25 percent to 18 percent, following a phone conversation with PM Modi.

Furthermore, Prime Minister Modi agreed that India would stop buying Russian oil and instead increase purchases from the United States and potentially Venezuela.

“The trade tariffs were reduced to 18% a tad lower than what it is for our neighbors, giving our exporters a relative advantage,” analysts at Finrex Treasury Advisors said. “FPIs may finally buy Indian equities after being sellers for such a long time. We need to wait and see the RBI stance today and in the coming days,” they added.