INDIA RUPEE-Rupee hoisted by softer dollar, positive sentiment on EU-India trade pact

By Jaspreet Kalra

MUMBAI, Jan 27 (Reuters) - The Indian rupee nudged higher on Tuesday as the dollar slid against major peers and sentiment turned positive on anticipation of a trade agreement between India and the European Union.

The rupee INR=IN rose 0.13% to 91.8225 per dollar as of 10:50 a.m. IST, strengthening modestly after hitting its all-time low of 91.9650 last week.

Persistent weakness in foreign capital inflows bogged down the currency, with constant importer hedging against further weakness and exporters holding back dollar sales skewing the flows against the rupee's favour.

On the day, though, the currency benefited as the dollar index hovered near a four-month low. The impending announcement regarding the conclusion of India-EU trade negotiations, expected later in the day, also dulled appetite for bearish wagers against the rupee.

"Speculators will be wary and the Reserve Bank of India, too, is unlikely to allow a record low on the day a deal may be announced," a trader at a state-run bank said. "That said, gradual rupee depreciation will persist and 92.50 seems to be the immediate support (for INR)," the trader added.

India's benchmark equity indexes, the BSE Sensex .BSESN and Nifty 50 .NSEI were both up about 0.1% each, supported by prospects of the deal, expected to be announced on Tuesday.

The deal is set to open the way for reduced tariffs on European cars and wine and an expanded market for Indian electronics, textiles and chemicals.

Meanwhile, U.S. Treasury Secretary Scott Bessent on Friday signaled the potential removal of additional 25% tariffs on India following a sharp reduction in Indian imports of Russian oil, which aided sentiment.

For the rupee, "the 92.00 level remains the key near-term pivot. A sustained break above this zone could open the door toward 92.20–92.50," said Amit Pabari, managing director at FX advisory firm CR Forex.

"However, consistent RBI intervention may help stabilise the currency and gradually pull USD/INR back toward the 90.80–91.00 range in the near term."