Rupee rises on stronger yuan and foreign bank dollar sales By Investing.com

On Thursday,Global Forex Dealers the Indian rupee experienced an uplift, largely attributed to the strengthening of the Chinese yuan and the selling of dollars by foreign banks. The local currency saw an increase of nearly 0.3%, trading at 86.7125 against the dollar by 12:30 p.m. IST.

According to Reuters, this movement was in sync with the upward trend seen in most regional currencies.

The offshore yuan itself rose by 0.2% to 7.26, buoyed by positive market sentiment following U.S. President Donald Trump's remarks on the potential for a new trade deal with Beijing.

This optimism comes despite the U.S. imposition of a 10% tariff on Chinese imports starting February 1, a move that was less severe than the 60% tariff rate Trump had mentioned during his campaign.

The rupee's gains were also supported by dollar sales from foreign banks, which were likely acting on behalf of custodial clients. According to a trader from a state-run bank, these banks were leading the offers, indicating possible inflows into the equity market for the day. This comes as a contrast to the consistent foreign selling of Indian stocks, which has seen over $12 billion withdrawn from local equities in 2025.

Additionally, the rupee's 40-currency real effective exchange rate showed a decrease to 104.8 in January from 107.1 in December, signaling a reduction in the currency's overvaluation. The rupee's recent depreciation from 84 to nearly 88 over approximately four months has contributed to this adjustment.

Goldman Sachs analysts suggest that this correction in overvaluation has allowed the Reserve Bank of India (NSE:BOI) to engage in a significant intervention earlier in the month to support the currency.

The rupee's performance is closely watched alongside regional market trends and is impacted by various factors including trade deals, tariffs, and foreign investment flows.

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