MUMBAI, Feb 20 (Reuters) – The Indian rupee strengthened on Thursday aided by a rise in the Chinese yuan after U.S. President Donald Trump said a new trade deal with Beijing was possible, while dollar sales from foreign banks also aided the local unit.
The rupee was up nearly 0.3% at 86.7125 as of 12:30 p.m. IST, largely in line with gains in most regional peers.
The offshore yuan was up 0.2% at 7.26 which helped lift regional currencies, while the dollar index declined to 106.9.
The yuan, a closely watched peer of the rupee, strengthened against the dollar as market sentiment improved after Trump said a new trade deal with Beijing was possible.
Although the U.S. imposed a 10% tariff on Chinese imports starting February 1, Trump has stopped short of the more extreme measures he had floated on the campaign trail last year which included a 60% tariff rate.
In addition to a rise in regional currencies, dollar sales from foreign banks, most likely on behalf of custodial clients, also aided the rupee, a trader at a state-run bank said.
“Foreign banks are dominating the offers, which suggests that there could be some inflows into equities today,” the trader added.
The persistent foreign selling of Indian stocks has been a sore point for the rupee, with overseas investors having pulled out over $12 billion from local stocks over 2025 so far.
Meanwhile, data released late on Wednesday showed that the rupee’s 40-currency real effective exchange rate eased to 104.8 in January, down from 107.1 in December, signalling an easing of the currency’s overvaluation.
The rupee’s recent slide from 84 to nearly 88 in about four months has helped ease the overvaluation, which Goldman Sachs reckons made the Reserve Bank of India more comfortable with a surprise and outsized intervention to shore up the currency earlier this month.
