By Jaspreet Kalra
MUMBAI (Reuters) -The Indian rupee rose to a one-month high on Thursday, boosted by optimism over U.S.-India trade negotiations, and as the central bank’s heavy-handed intervention in the previous session kept short sellers cautious.
The rupee rose to a peak of 87.70 in early trading before trimming gains to last quote at 87.87, up 0.2% on the day.
U.S. President Donald Trump said on Wednesday that Indian Prime Minister Narendra Modi has pledged to stop buying oil from Russia, which some traders say could mark the start of a cooling of trade frictions between the two economies.
Trump has targeted India for its Russian oil purchases with a 25% tariff, on top of the 25% levy on Indian goods under the so-called reciprocal tariffs.
India said on Thursday that discussions were ongoing with the United States on deepening energy co-operation between the two countries.
Official confirmation of positive developments on the trade front could spur two-way moves for the rupee, with the first knee-jerk move lifting the currency, which could then temper as people parse the details, a trader at a state-run bank said.
Meanwhile, the central bank’s strong market intervention on Wednesday has also eased the pressure the rupee encountered over the last few weeks. Bankers estimate that the Reserve Bank of India sold up to $5 billion to shore up the rupee.
Traders pointed to dollar demand from importers, including oil companies, that pulled the rupee off its four-week high reached on Thursday.
“If global sentiment remains supportive, the rupee could be entering a stronger phase after weeks of stagnation,” said Amit Pabari, managing director at FX advisory firm CR Forex.
Elsewhere, the dollar index was little changed at 98.6 while Asian currencies were trading mixed. The focus was on the trade spat between the world’s two biggest economies, with U.S. officials blasting China’s expansion of rare earth export controls as a threat to global supply chains.
(Reporting by Jaspreet Kalra; Editing by Rashmi Aich and Eileen Soreng)
