Broad dollar weakness helps rupee post best day in over three weeks

MUMBAI, March 5 (Reuters) – The Indian rupee rose on Wednesday as a broadly weaker U.S. dollar spurred gains in most Asian currencies, with investors fretting over a slowdown in the U.S. and how trade tariffs may impact the world’s largest economy.

The rupee closed 0.3% higher at 86.9550 against the U.S. dollar, its best single-day gain since February 11.

Traders pointed to dollar sales from foreign and state-run banks during the session, which helped lift the rupee, alongside a markedly softer dollar.

The dollar index fell nearly 0.6% to 104.9, its weakest level since November 2024, pressured by a sharp rise in the euro which was hovering at a near four-month peak against the greenback. Asian currencies were up between 0.1% to 0.8%.

Concerns about the U.S. growth outlook alongside uncertainty about the growth-inflation impact of trade tariffs have weighed on the dollar and U.S. bond yields over recent sessions.

The U.S. has imposed a 25% levy on Mexican and Canadian imports and has doubled duties on Chinese imports to 20%.

In his first speech before U.S. lawmakers since taking office, Trump said on Tuesday that further tariffs would follow on April 2, including “reciprocal tariffs” and non-tariff actions aimed at balancing out years of trade imbalances.

Stubborn inflation and President Donald Trump’s trade policies have rekindled fears of stagflation in the world’s largest economy with analysts warning against complacency towards Trumps’ policies.

The dollar is “still a little vulnerable to any weaker U.S. activity data through March, before the tariff story once again dominates in April,” ING Bank said in a note.

The immediate focus will be on U.S. labour market data this week, starting with ADP employment figures due later on Wednesday. Remarks from Federal Reserve policymakers will also be in focus to gauge the future path of policy rates. (Reporting by Jaspreet Kalra; Editing by Janane Venkatraman)