The Indian rupee strengthened against the US dollar on Tuesday, gaining 18 paise to reach 90.12 in early trading sessions. The currency's appreciation came amid a softer greenback and declining global crude oil prices, though gains were capped by US President Donald Trump's tariff threats on India and sustained weakness in domestic equity markets.

Currency Performance and Opening Levels

At the interbank foreign exchange market, the rupee opened at 90.22 before gaining ground to 90.12, marking an 18 paise improvement from its previous close of 90.30. The currency had remained weak for four consecutive sessions before Tuesday's recovery, losing 10 paise on Monday as geopolitical uncertainty bolstered the dollar's appeal.

Trump's Tariff Threats Impact Market Sentiment

Despite the early gains, the rupee faced significant headwinds from geopolitical developments. Trump threatened India with additional tariffs if the country continued purchasing oil from Russia, creating uncertainty about future trade relations. According to Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, "Trump threatened India with more tariffs if India did not toe the line of not buying oil from Russia. The rupee continues to be hampered by the threats."

Bhansali warned of potential further weakness, stating there is "a good chance for the rupee to go back to 91 levels with the trade deal not happening in near future." This assessment reflects growing concerns about deteriorating trade relationships between the two countries.

Global Economic Factors and US Military Operations

The dollar's weakness provided some support to the rupee despite political tensions. The US ISM Manufacturing PMI came in lower than expected at 47.90, giving market indications of potential rate cuts due to a weakening economy. The dollar index was trading 0.04% higher at 98.22 after initially falling to 98.31 levels.

Adding to global uncertainty, the US carried out a military operation in Venezuela, deposing President Nicolas Maduro. Trump announced that the US would "run" the South American country and tap its vast oil reserves to sell to other nations, further influencing global oil market dynamics.

Domestic Market Pressures

Domestic equity markets reflected cautious investor sentiment, adding pressure on the currency. The sustained weak sentiment in Indian markets, combined with foreign institutional investor outflows, constrained the rupee's gains despite favorable global factors.

Market Outlook Amid Political Uncertainty

The rupee's performance reflects the complex interplay between supportive global factors and mounting political pressures. While softer crude oil prices and dollar weakness provided temporary relief, Trump's tariff threats and geopolitical tensions continue to weigh on the currency's prospects.

Forex traders noted that the combination of US tariff threats, FII outflows, and sustained weak sentiment in domestic equity markets capped sharper gains in the rupee. The currency's ability to maintain current levels will largely depend on the evolution of US-India trade relations and broader global market dynamics in the coming sessions.

The Indian rupee opened at 90.21 against the US dollar, showing a marginal recovery from its previous close of 90.27. The local currency had weakened by seven paise in the previous session, facing mounting pressure from a combination of external factors, with market experts warning of potential further declines in the near term.

Recent Currency Performance

The rupee's recent performance reflects the challenging market conditions, with the currency experiencing volatility amid various economic pressures.

Central Bank Intervention Strategy

The Reserve Bank of India had stepped in during the previous session when the rupee touched 90.29 levels, implementing measures to curb excessive volatility in the currency market. However, market dealers noted that the central bank's intervention was measured rather than aggressive in nature.

"The RBI intervened near the 90.30 levels, but it was only to curb the depreciation and not to turn the tide," explained Ritesh Bhansali, Deputy CEO of Mecklai Financial Services. This approach suggests the central bank is focused on managing volatility rather than defending a specific exchange rate level.

Ongoing Market Challenges

Several negative factors continue to weigh on the rupee's performance. The delayed trade deal negotiations with the United States have created uncertainty in the market, while diminished foreign investor appetite for Mumbai-listed equities has reduced dollar inflows. These safe-haven pressures have contributed to the currency's weakness.

Market experts indicate a greater probability for further slippages in the rupee, suggesting that the current negative sentiment may persist. The combination of external pressures and reduced foreign investment flows continues to challenge the local unit's stability despite the marginal recovery in opening rates.