The rupee is posting its best week in more than three years on the boost from the US trade pact

The Indian rupee fell on Friday, scorched by likely dollar outflows and traders cutting long bets, but posted its best gain in more than three years after New Delhi and Washington announced a long-awaited trade deal.The rupee closed at 90.6550 per dollar, down 0.3% on the day but up 1.4% on a weekly basis, the best weekly gain since January 2023.

India’s central bank kept its key repo rate unchanged, supported by a positive economic outlook and reduced pressure after trade deals with the US and Europe. Monetary policy remained at a ‘neutral’ level, indicating that interest rates will remain low for some time to come.“Going forward, we believe the MPC will be guided by evolving macroeconomic conditions and the outlook based on data from the new series in charting the future stance of monetary policy,” Barclays economists said in a note.

The rate decision had little impact on the rupee, which was hit by the outflows, traders said.

Strong appetite to buy dollars at the daily reference rate led to weakness earlier in the session. The fall worsened when stop-losses were triggered on long rupee bets, a trader at a Mumbai-based bank said.

This eroded gains for the week, which were largely driven by a rally on Tuesday after the US and India announced they had reached a trade deal after months of negotiations. While traders and analysts say the trade breakthrough has lifted the rupee, a sustained rally would depend on a recovery in foreign portfolio inflows.

Foreign portfolio investors have bought about $1 billion net of local stocks so far in February, after selling net $4 billion last month.

In global markets, the dollar index was slightly lower at 97.8, while Asian currencies traded mixed.