Mumbai: The rupee appreciated 27 paise to 84.96 against the US dollar in early trade on Tuesday, supported by robust foreign fund inflows, stronger domestic data, and easing global tensions.
Moreover, a strong rally in domestic equities driven by a surge in foreign fund flows further boosted sentiments.
However, caution lingers, as any escalation in tensions between India and Pakistan could swiftly reverse gains and pressurise the rupee, much like past geopolitical episodes, they noted.
Forex traders said India's manufacturing and industrial production, both expanded by 3 per cent, reflecting the health of domestic demand.
At the interbank foreign exchange, the domestic unit opened at 85.06 against the greenback, then gained ground and touched 84.96, registering a gain of 27 paise over its previous close.
In initial trade, the rupee also touched an early low of 85.15 against the greenback.
On Monday, the rupee appreciated 18 paise to close at 85.23 against the US dollar.
Importantly, China has shown signs of de-escalation by offering key exemptions on tariffs, signalling a willingness to reduce trade tensions," CR Forex Advisors MD Amit Pabari said.
Measures such as exempting certain goods from tariffs and softening automotive tariffs show a deliberate effort to avoid an all-out trade war and provide breathing room to global supply chains, Pabari added.
"On the global front, a more diplomatic tone has emerged. US Treasury Secretary Scott Bessent indicated that negotiations with Asian allies, including India and Japan, are progressing well.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.17 per cent at 99.18.
On the domestic macroeconomic front, India's industrial production growth remained almost flat at 3 per cent in March sequentially, though, on a year-on-year basis, it slipped from 5.5 per cent, mainly due to poor performance of the manufacturing, mining, and power sectors.
Brent crude, the global oil benchmark, fell 0.68 per cent at USD 65.41 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex advanced 404.00 points or 0.50 per cent to 80,622.37, while the Nifty rose 115.40 points or 0.47 per cent to 24,443.90.
Foreign institutional investors (FIIs) bought equities worth Rs 2,474.10 crore on a net basis on Monday, according to exchange data.
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