Indian Rupee Jumps on New US Trade Pact as Aussie Dollar Climbs After Rate Hike

The rupee surged hard. India and the US struck a major trade deal on February 3, sending the currency up 1.5% against the dollar in what traders called the biggest single-day jump in over two months.

Finance Minister Nirmala Sitharaman called the agreement a “significant milestone” that should boost exports in textiles and pharmaceuticals while strengthening economic ties between both nations. The deal aims to cut tariffs and expand bilateral trade, giving India’s economy a much-needed shot in the arm. Market watchers say the rupee’s climb to its highest level since early December shows investors are pretty optimistic about what’s coming next. Foreign money managers are already eyeing India’s manufacturing sector, betting the trade pact will bring more investment dollars into the country.

Things moved fast in Australia too.

The Reserve Bank raised rates by 25 basis points to 4.0%, pushing the Aussie dollar up 1.2% as traders scrambled to buy the currency. RBA Governor Philip Lowe said inflation pressures are still too high and the central bank can’t wait any longer to act. He knows Australian families are feeling the pinch but insists getting prices under control matters more for long-term growth. The rate hike drew plenty of attention from yield-hungry investors who see Australia as one of the few developed markets still tightening policy.

But China’s yuan stayed weak, weighed down by disappointing factory data from earlier this week. The People’s Bank tried to prop up the currency through daily fixes, yet market sentiment remains pretty cautious about China’s economic outlook.

Japan’s yen slipped lower too. Investors are still trying to figure out what the Bank of Japan will do next after its recent policy meeting left more questions than answers about future moves.

The Thai baht managed to edge higher though, getting a boost from China lifting travel restrictions that should bring more tourists back to Thailand. Tourism is huge for the Thai economy, and visitor numbers are already picking up steam. Hotel bookings in Bangkok and Phuket jumped 40% in the past two weeks alone, according to local tourism officials.

Currency markets stayed pretty volatile overall. Geopolitical tensions and shifting central bank policies worldwide are keeping traders on edge, with most analysts expecting more wild swings ahead.

And the India-US trade deal still needs final approval from both governments. The RBA’s next moves are anyone’s guess, while the Bank of Japan didn’t say much about potential policy changes when reached for comment.

Singapore’s dollar saw some choppiness on February 3 after the Monetary Authority decided to keep its current policy unchanged, citing stable inflation but worrying about slowing export growth in the city-state.

South Korea’s won dropped 0.7% against the dollar following the Bank of Korea’s decision to hold rates steady at 3.5%. Governor Rhee Chang-yong pointed to global uncertainties as the main reason for staying put, though some market players think the central bank is falling behind the curve on inflation.

Malaysia’s ringgit got a lift from rising oil prices. Brent crude climbed to $92 per barrel, which is good news for Malaysia since energy exports make up a big chunk of the country’s trade balance. The ringgit gained about 0.4% on the day, its best performance in three weeks.

The Philippine peso stayed under pressure, trading near three-month lows as the country’s trade deficit keeps widening. The central bank hasn’t stepped in yet but officials are watching closely.

Indonesia’s rupiah managed a small gain of 0.3% after Bank Indonesia kept rates at 5.75%. Governor Perry Warjiyo wants to support the recovery and boost domestic demand, so he’s sticking with loose policy for now.

Vietnam’s dong barely moved, staying stable while other regional currencies bounced around. The State Bank of Vietnam keeps talking about flexible exchange rates to help exporters compete globally.

Turkey’s lira slipped against the dollar to around 27.5 after January inflation came in at 48.5%, down slightly from December but still way too high. The central bank faces tough choices between supporting growth and fighting prices.

Russia’s ruble fell 0.5% as geopolitical tensions and sanctions continue weighing on the currency despite central bank intervention efforts. The ongoing Ukraine conflict makes it hard to predict where the ruble goes next.

Oil prices stayed elevated at $92 per barrel for Brent crude, helping commodity currencies but adding to inflation worries elsewhere.

The India-US trade agreement covers roughly $190 billion in annual bilateral commerce, with American companies gaining better access to India’s massive consumer market of 1.4 billion people. Major US tech firms like Apple and Google have already ramped up operations in India over the past year, while Indian IT giants such as Infosys and TCS continue expanding their American footprint.

Australia’s rate decision puts the RBA ahead of most G7 central banks in the tightening cycle. Core inflation hit 6.9% in the latest reading, well above the bank’s 2-3% target range, forcing policymakers to act despite concerns about household debt levels reaching record highs.