Rupee logs biggest rise in over a month as traders see risks of additional US tariff ebbing
The rupee strengthened 0.46% to 86.9500 per U.S. dollar, against Monday's close of 87.3500.
The rupee's appreciation follows a White House summit with European leaders on Monday where U.S. President Donald Trump assured Ukraine's President Zelenskiy that Washington would help guarantee its security in any deal to end the war with Russia.
"The rupee rallied as concerns eased over potential U.S. tariffs tied to India's imports of Russian oil," said Jigar Trivedi, senior currency analyst at Reliance Securities.
Stronger domestic consumption and renewed investor interest is also likely to support the rupee, Trivedi added.
The local currency was also bolstered by growth optimism following New Delhi's proposal to cut tax rates.
Indian Prime Minister Narendra Modi's planned cuts on goods and services tax (GST) – the biggest such reform in eight years - is expected to support consumption and has lifted sentiment for the rupee.
Economists said the measures could provide a near-term boost to growth momentum and help offset the drag from weak external conditions.
"The measures, if sustained, may help bring back foreign portfolio flows that had been negative in recent weeks," said Amit Pabari, managing director of CR Forex.
Asian currencies were largely muted against the dollar, ahead of a key the speech of Federal Reserve Chair Jerome Powell speech at Jackson Hole on Friday, as this could provide clues on the interest rate trajectory in the world's largest economy.
Meanwhile, the dollar index was down 0.11% at 98.012 as on 1538 IST.
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