The Indian rupee opened 45 paise stronger on April 11, quoting 86.25 per US dollar, compared to 86.70 in the previous session, amid fresh cues from the US on tariff policy and a weakened dollar index. The gain in the local currency marks a significant shift in sentiment, largely driven by international developments, particularly a surprise move by former US President Donald Trump on global trade duties.

Trump's 90-Day Pause on Tariffs Sparks Market Reaction

In a major announcement on April 10, Donald Trump, using his Truth Social platform, revealed a 90-day pause on the full implementation of reciprocal tariffs, excluding China. The US has decided to suspend additional tariffs on Indian goods for the next three months, setting a 10% baseline tariff for all nations except China, which faces a steep 125% tariff.

Trump stated that over 75 countries had approached the US administration seeking negotiations on tariffs. As a result, he "authorized a 90-day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately." This policy shift is seen as a diplomatic softening, aimed at avoiding immediate trade disruption while signaling firmness against China.

Impact on Indian Rupee and Currency Sentiment

The rupee reacted positively to this development. Analysts believe that reduced tariff risks and softening of the US trade stance have created favorable conditions for the Indian currency.

According to Amit Pabari, Managing Director at CR Forex Advisors, "With the rupee now firming and sentiment improving, a sustained breach below 86.00 could open the door for further gains toward the 85.50–85.60 levels."

Market experts also highlighted that this appreciation in the rupee was largely driven by foreign investor optimism stemming from improved trade relations and lower tariff threats.

Dollar Index Weakens Amid Market Sell-offs

Another significant factor aiding the rupee's rise was a sharp drop in the dollar index, which measures the US dollar’s strength against six major global currencies. The index fell to 100.03 in early trade, down from 100.867 in the previous session. This decline followed intense sell-offs in US stocks and bonds, triggered by growing concerns over Trump's protectionist policies and rising uncertainties around economic recovery.

Foreign investors are reassessing their exposure to the US markets and looking for emerging market alternatives, especially in Asia. India, with its relatively stable macroeconomic outlook, stands to benefit from this shift.

Broader Forex Market Implications

The weakening of the dollar and easing of tariff tensions could offer near-term relief to other emerging market currencies as well. Analysts believe that if the dollar index continues to slide and trade sentiment improves further, the rupee could see extended strength in the short term.

The pause in tariffs by the US is expected to encourage trade flows, reduce the cost of imports, and positively influence India’s trade balance. Sectors like pharmaceuticals, IT, and agriculture, which often face scrutiny in US trade reviews, might get a temporary breather from trade-related uncertainty.

Looking Ahead

Despite this short-term boost, analysts urge caution. The 90-day pause is not a permanent reversal of policy. There remains a possibility of tariff hikes resuming after July 9 if negotiations don’t reach a conclusion. Moreover, geopolitical risks, inflation pressures, and global interest rate trajectories will continue to influence the rupee’s trajectory.

For now, though, the market has welcomed the breather. Improved sentiment, a weaker dollar, and Trump’s tariff relaxation have offered a temporary boost to the Indian rupee, which investors hope to sustain in the days to come.

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