MUMBAI, Jan 21 Reuters The Indian rupee shed much of its early gains to close largely unchanged on Tuesday as the U.S. dollar recovered after President Donald Trump said he was thinking about imposing tariffs on Canada and Mexico.

The rupee closed at 86.5775 against the U.S. dollar, down from its close of 86.5675 in the previous session.

While the local unit touched a peak of 86.2825 early in the session, it trimmed the gains on the back of broadbased dollar bids and a 0.5 rise in the dollar index after it touched a twoweek low on Tuesday.

Staterun banks were spotted intermittently offering dollars, which helped limit the pressure on the rupee, traders said.

U.S. President Donald Trump refrained from imposing tariffs on his first day in office on Monday, sending the dollar sharply lower, but later said he is considering a 25 levy on imports from Canada and Mexico, sparking a recovery in the greenback.

U.S. bond yields were lower on the day but managed to trim their decline, with the 10year Treasury yield recovering to 4.57 after hitting a near threeweek low on Tuesday

Markets are at least cautiously optimistic that indiscriminate universal tariffs wont be delivered all in one go, ING Bank said in a note.

Expect a lot of 39;headline trading39; and shortterm noise, with risks still skewed for a stronger dollar, it said.

Meanwhile, dollarrupee forward premiums dipped on Tuesday on the back of buysell swaps conducted by staterun banks, most likely on behalf of the…