By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee closed slightly higher on Tuesday tracking a rise in Asian peers, while dollar demand from importers and foreign banks kept a lid on the local unit’s gains.
The imposition of U.S. trade tariffs on China, Canada and Mexico dampened risk appetite, triggering a decline in global stocks and bond yields. However, Asian currencies rose between 0.1% and 0.6%.
The rupee closed at 87.2650 against the U.S. dollar, up 0.1% on the day.
While the currency slipped a tad below 87.40 in early trading, intermittent dollar sales from state-run banks helped support the rupee, three traders said.
“There was a mix of (dollar) buying from oil companies, foreign banks and routine importer covering,” a trader at a state-run bank said.
Persistent outflows from local equities have also weighed on the rupee in recent weeks. Overseas investors have net sold over $14 billion worth of Indian stocks so far in 2025, contributing to making the rupee Asia’s worst-performing currencies.
Meanwhile, U.S. President Donald Trump’s new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20%.
While the Canadian dollar and Mexican peso weakened, the offshore Chinese yuan was up 0.3% at 7.27. The dollar index was down 0.2% at 106.3 while the 10-year U.S. bond yield dipped to 4.16%, its lowest level since October last year.
Concerns about weakness in the U.S. economy have weighed on the dollar and U.S. bond yields, with traders now pricing in three cuts by the Federal Reserve in 2025, a shift from less than two cuts priced earlier this year.
“It’s a tough call, but the tariff story could well keep (dollar index) support at 106.15/35 intact – unless US equities tank,” ING Bank said in a note.
(Reporting by Jaspreet Kalra; Editing by Eileen Soreng)
