Indian rupee sign.
Credit: PTI Photo
Mumbai: The rupee appreciated 19 paise to 87.20 against the US dollar in early trade on Tuesday, reflecting the optimism around domestic reforms and equities, though external risks remain elevated.
Forex traders said the rupee is holding firm at current levels, tracking the recent rally in domestic equities after sweeping tax reforms announced by PM Narendra Modi.
Moreover, suspected RBI intervention and cautious optimism around the Ukraine-Russia conflict supported investors' sentiments.
At the interbank foreign exchange market, the rupee opened at 87.24 against the US dollar, then touched 87.20, registering a gain of 19 paise over its previous close.
On Monday, the rupee appreciated 20 paise to close at 87.39 against the US dollar.
Rupee opened on a positive note as FPIs returned in a small way back to buying Indian equities after various steps for growth announced by PM Narendra Modi on Friday, including changes in the GST regime, said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
"Rupee is expected to trade in a range of 87.20 to 87.60 during the day," Bhansali added.
Finance Minister Nirmala Sitharaman will attend a crucial meeting of a state ministerial panel on August 20 to put forth the Centre's proposal for sweeping GST reforms that will slash tax rates and lead to reduction in prices of common use items.
However, the rupee’s next moves may be shaped more directly by US trade policy. US President Donald Trump’s additional 25 per cent tariffs on Indian goods are scheduled to take effect on Wednesday, August 27, CR Forex Advisors MD - Amit Pabari said.
Meanwhile, Brent crude, the global oil benchmark, was trading lower by 0.44 per cent at USD 66.31 per barrel in futures trade, after talks between Trump and Ukrainian President Volodymyr Zelenskyy remained inconclusive in the wake of the recent Russian-US summit on Friday.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was higher by 0.05 per cent at 98.21, as US President Trump hosted talks on ending the war in Ukraine and traders pared bets on a September rate cut before a speech by FED Reserve Chief Jerome Powell at this week's Jackson Hole Meeting.
On the domestic equity market front, Sensex climbed 203.44 points to 81,477.19 in early trade, while the Nifty was up 53.4 points to 24,930.35.
Foreign Institutional Investors bought equities worth Rs 550.85 crore on Monday, according to exchange data.