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India–US Trade Deal: On Tuesday (February 3), the Indian rupee strengthened by 1.10 against the US dollar, which is a sign of renewed hope in the currency market. The rupee was trading around 90.40/$ in early trade, which is a big recovery from the recent weakness.

Analysts attributed this recovery to the hope that the recent trade agreement between India and the US may boost investor confidence and encourage foreign portfolio investment. This deal has reduced the high tariffs imposed on Indian exports, thereby eliminating a major cause of uncertainty, which was putting pressure on the currency.

Reference to recent weakness

The rupee was the weakest Asian currency in 2025, falling nearly 5% over the year and more than 2% in January alone. Limited foreign investment and increasing demand for dollars from importers had put a lot of pressure on the currency.

Potential impact of trade deal

Addressing tariff- concerns is expected to improve the competitiveness of exports and reduce policy uncertainty. “Reduced tariff uncertainty could boost investor confidence and support a short-term rally in the rupee and domestic equities,” said Mark Whalen, head of investments at Lucerne Asset Management. MUFG Bank said that although investment has been slow, this agreement could provide medium-term support to the currency.

Impact on corporate hedging

Earlier, importers had increased forward dollar purchases to avoid further decline, while exporters delayed hedging, creating an imbalance that further put pressure on the rupee. Analysts hope that the reduction in tariff concerns will reduce this imbalance, leading to a better demand-supply balance in the currency market.

Traders also expect a reduction in betting against the rupee, which could further strengthen the recovery. How long this advantage will last will depend on the actual foreign investment and overall market sentiment in the coming days.