Mumbai, Jul 22 (PTI) The rupee traded in a narrow range and appreciated 5 paise to 86.26 against US dollar in early trade on Tuesday, tracking a positive trend in domestic equities.

Forex traders said uncertainty over the eventual state of tariffs globally has been a huge overhang for the forex market, leaving currencies trading in a tight range.

At the interbank foreign exchange, the domestic unit opened at 86.26 against the greenback, registering a rise of 5 paise over its previous close.

In Initial trade, it also touched 86.29 against the American currency.

On Monday, the rupee depreciated 15 paise to close at 86.31 against the US dollar.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.03 per cent to 97.88, as investors watched out for a trade deal ahead of the August 1 deadline for countries to strike deals or face steeper tariffs.

Brent crude, the global oil benchmark, went down by 0.81 per cent to USD 68.65 per barrel in futures trade.

"Brent oil prices fell in Asian trade as signs of a brewing US-EU trade conflict weighed. The trade deal impasse could hurt economic activity and thus oil demand too," said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

Bhansali further noted that "FPI bids for dollars are strong while RBI at the upper end is selling dollars to protect the rupee." Forex traders said all eyes are now on the outcome of India-US trade talks, especially as the August 1 deadline for potential tariffs on Indian exports draws near.

If the discussions fail or get delayed, Indian exporters could face fresh pressure -- adding to the rupee’s challenges.

However, if a deal is reached, it could offer a much-needed breather. Until then, the uncertainty is likely to keep market participants cautious.

The US team will visit India in August for the next round of negotiations for the proposed bilateral trade agreement between the two countries, an official said on Monday.

India and the US teams concluded the fifth round of talks for the agreement last week in Washington.

Meanwhile, in the domestic equity market, Sensex advanced 149.47 points or 0.18 per cent to 82,349.81, while Nifty rose 36.80 points or 0.15 per cent to 25,126.20.

Foreign institutional investors (FIIs) offloaded equities worth Rs 1,681.23 crore on a net basis on Monday, according to exchange data. PTI DRR DR DR

Trade deal uncertainty threatens exporters and drives currency volatility pending resolution of bilateral negotiations. Uncertainty over prospective tariffs tied to stalled trade negotiations is the dominant factor affecting forex and export-sensitive markets, creating contingent risk to exporters' competitiveness and downward pressure on the domestic currency if talks fail; bilateral negotiation rounds and potential tariff imposition are central to market pricing, while central bank currency intervention, foreign portfolio flows, commodity prices, and equity movements interact with these trade-policy expectations to shape short-term exchange-rate dynamics.