MUMBAI, July 1 (Reuters) - The Indian rupee inched up on Tuesday, tracking regional peers and the dollar index's decline to a three-year low amid persistent worries over U.S. fiscal and trade policies.

Data released after market-hours on Monday showed that the size of Reserve Bank of India's FX forward book shrank to $65.2 billion at the end of May, down from $72.6 billion in the previous month. The data is released with a one-month lag.

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The Reserve Bank of India's aggregate short dollar position in FX forwards and futures had climbed to a record in February amid dollar-selling interventions by the central bank to support the rupee.

The rupee has recovered about 2.5% since hitting an all-time low of 87.95 in February, aided by a dollar's struggles.

Maturity of near-tenor swaps - worth about $7.4 billion in the up to 1-month bucket in April - likely contributed to shrinking the central bank's aggregate short dollar positions.

"While the RBI had increased the short dollar positions in its forward book during periods of INR volatility, it has opportunistically termed out some of those positions while also letting some positions mature," said B. Prasanna, treasury head at ICICI Bank.

On the day, the rupee and its regional peers were boosted by the dollar index drop to a multi-year low on worries over the U.S. fiscal deficit and uncertainty surrounding trade deals with major countries.

The rupee was up 0.2% at 85.59 per U.S. dollar as of 10:20 a.m. IST.

U.S. Treasury Secretary Scott Bessent warned on Monday that countries could be notified of sharply higher tariffs as a July 9 deadline approaches. The White House, meanwhile, said that an update on a trade deal with India was expected "very soon."

https://www.reuters.com/world/india/rupee-inches-up-near-tenor-swap-maturities-trim-central-banks-forward-book-2025-07-01/