The Indian rupee surged by 40 paise on Tuesday, marking its largest daily gain in a month. It closed at 86.95, strengthening from the previous day’s 87.35. The rally was driven by a combination of domestic and international factors, including optimism about potential easing of U.S. tariffs and expectations of reduced sanctions on Russian oil imports.

International talks between U.S. President Donald Trump, Russian President Vladimir Putin, and Ukrainian President Volodymyr Zelensky raised hopes for a peace deal that could reduce the risk of further sanctions on Russian oil, which could be beneficial for India’s economy.

On the domestic front, there were positive signals supporting the rupee. Market optimism was fueled by expectations that the government might cut Goods and Services Tax (GST) rates—the largest such reform in eight years—which is anticipated to boost near-term growth, improve sentiment, and help revive foreign portfolio flows that had recently turned negative.

The rupee also gained strength following a recent upgrade in India’s credit rating outlook, which has bolstered confidence in the country’s economic prospects. According to Jateen Trivedi of LKP Securities, the combination of the rating upgrade, reduced foreign investor selling pressure, and positive signals from growing India-Japan relations ahead of Prime Minister Modi’s upcoming visit to Tokyo have helped improve sentiment.

Dilip Parmar of HDFC Securities noted that the rupee outperformed many other Asian currencies, supported by growth-focused policies, renewed foreign fund inflows, and a technical pullback. He expects the spot USD/INR rate to find support at 86.80, with resistance near 87.20 in the near term.

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