The Indian rupee strengthened 1.2% to 90.40 against the US dollar as the India-US trade deal optimism lifted investor sentiment. Market analysts believe that this sustained appreciation will depend on capital flows, global risk sentiment, and policy cues. The deal has eased high tariffs on Indian exports, eliminating a major uncertainty that had been pressuring the currency.
The rupee recorded its strongest rise in over three years on Tuesday (February 3, 2026), after the US reduced tariffs on Indian products. This shift provided the much-needed confidence for investors in domestic assets. US President Donald Trump said he would cut the tariff on Indian goods from 25% to 18%.
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 was intensified, followed by limited foreign capital inflows and strong dollar demand from importers.
President Trump revealed the agreement on social media after speaking with Indian Prime Minister Narendra Modi, saying the nation had committed to stopping purchases of Russian oil and easing trade restrictions on American exports.
The trade deal will be "effective immediately," Trump said, signaling immediate tariff relief for India.
India and the US have been locked in negotiations since early 2025, but the talks have been postponed multiple times after the US slapped tariffs as high as 50% on Indian imports in August. The negotiations resumed in October.
“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.
“The India-US trade deal is a massive positive, arriving just when we needed it most after a budget that prioritised tactics over populism. With valuations corrected and fundamentals rock-solid, this should draw FIIs back to Indian markets in the short term,” Divam Sharma, Co-Founder and Fund Manager at Green Portfolio PMS, shared.
According to Sodhani, the longer-term direction of the currency will continue to be shaped by oil prices, global monetary conditions, geopolitical factors, and India’s broader macroeconomic performance. “For USDINR broader range to remain between 89.60-91.40 levels. The clouds of a break of 92.00 levels now stay a bit distant,” Sodhani said.
Anuj Gupta, a market expert, believes that further appreciation of the Indian currency is expected in the near term. “Further appreciation is expected, as rising exports could boost demand for the rupee, with the currency likely to test the 89.50–89.00 levels in the near term,” he explained.
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Analysts expect the trade deal to ease geopolitical uncertainty stemming from the US-India trade dispute, which had worried investors. Industry and political leaders have welcomed the India-US trade deal, which can deepen supply-chain integration, allow faster technology collaboration, and attract investment into advanced manufacturing.
A stronger India-US partnership can accelerate growth, expand market access, and support the nation’s ambition to be a globally competitive manufacturing and innovation hub.