Trade deal signals turning point for rupee

THE ANNOUNCEMENT OF the trade deal with the US, effective immediately, lit a delighted fire under the rupee.

- JAMAL MECKLAI

While it had steadied a bit from its sharp decline on budget day, which provided some comfort, the rupee shot higher, gaining nearly 1.5% from the previous opening, more even than in October last year when RBI shocked the market by intervening aggressively at the non-deliverable forward (NDF) opening.

Over the last year or so, the rupee had become hugely undervalued — according to RBI data, the rupee's trade-weighted real effective exchange rate was 95.3 in December, its lowest level in a decade — under pressure from Trump’s tariffs but primarily as a result of the steady erosion in India’s attractiveness as an investment destination. So, its sharp turnaround should hardly be surprising.