INDIA RUPEE-Rupee recovers slightly on equity rally after Trump backpedals on Europe tariff threat

By Dharamraj Dhutia and Nimesh Vora

MUMBAI, Jan 22 (Reuters) - The Indian rupee staged a modest recovery on Thursday, buoyed by an improvement in risk appetite after U.S. President Donald Trump stepped back from tariff threats against Europe linked to the Greenland dispute.

The rupee INR=IN opened higher at 91.53 and has since traded largely rangebound, with pressure still tilted against it. That is a pattern seen repeatedly in recent days, where recoveries have struggled to hold.

The currency was last quoted at 91.59.

The rupee plunged 0.8% on Wednesday to hit an all-time low of 91.7425 to the U.S. dollar. The slide came despite intermittent central bank dollar selling in the latter half of Wednesday's session, though several said the price action did little to suggest meaningful intervention.

U.S. equities and Treasuries rallied after Trump said the U.S. would not proceed with tariffs on Europe that were scheduled to take effect from February 1, speaking at the World Economic Forum in Davos.

His remarks provided relief for Asian currencies, including the struggling rupee, as they ruled out an immediate flare up in trade tensions and followed comments dismissing the use of force to capture Greenland.

Meanwhile, the traders were largely indifferent to Trump's separate comment stating that the U.S. was going to have a good deal with India, signalling movement on trade talks between the two countries.

They noted that similar broad statements on a trade deal have been made repeatedly in the past.

Volatility in the rupee is likely to persist in the near term, said Radhika Rao, a senior economist at DBS, adding that depreciation, however, is expected to be more measured than the recent sharp moves.

Dollar demand and capital flows will continue to dominate, with domestic growth and inflation remaining supportive and progress on EU and U.S. trade talks potentially improving sentiment toward the rupee, she said.