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India-US trade deal impact: The rupee recorded its strongest rise in over three years, after the US sharply reduced tariffs on Indian products, lifting investor confidence in domestic assets. The Indian currency surged the most since 2021, according to Bloomberg.

The local currency strengthened by 1.2% to 90.40 against the dollar on Tuesday after US President Donald Trump said he would cut the tariff on Indian goods from 25% to 18%. The deal has eased high tariffs on Indian exports, eliminating a major uncertainty that had been pressuring the currency.

The rupee emerged as Asia’s weakest currency in 2025, depreciating nearly 5% over the year and sliding more than 2% in January alone.

Pressure on the currency intensified due to limited foreign capital inflows and strong dollar demand from importers.

“The trade deal removes a major overhang that had weighed on capital flows. Sentiment-driven demand for the INR has strengthened as foreign investors reassess risk,” said Kunal Sodhani, Head of Treasury, Shinhan Bank India.

U.S. President Donald Trump revealed the agreement on social media after speaking with Indian Prime Minister Narendra Modi, saying India had committed to stopping purchases of Russian oil and easing trade restrictions on American exports.

Indian equities and the rupee have been under heavy pressure since Washington imposed tariffs in late August, leaving them among the weakest-performing emerging market assets in 2025 amid record foreign investor withdrawals.

The trade pact is also seen as easing geopolitical uncertainty stemming from the U.S.–India trade dispute, which had made investors wary of committing fresh capital to the country.

(This is developing story)

Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.

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