The Indian Rupee (INR) increased slightly against the US Dollar (USD) as traders were cautious before US economic data was released. The USD/INR pair decreased to around 88.85, although the Rupee remained under pressure, nearing its record high of 89.10 due to US-India trade tensions.
The Reserve Bank of India (RBI) has intervened several times since August to stabilise the Rupee. Foreign Institutional Investors have been reducing their holdings in India’s stock market, selling shares worth Rs. 383.68 crore on Thursday.
Inflation And Interest Rates
India’s Wholesale Price Index (WPI) Inflation dropped by 1.21% in October, faster than the expected 0.6% decrease. This has led to speculation of a potential interest rate cut by the RBI in December, especially after Consumer Price Index (CPI) data revealed modest inflationary growth of 0.25%.
The US Dollar weakened as the market anticipates potentially poor upcoming US economic data due to a temporary government shutdown. The probability of a Federal Reserve interest rate cut in December has decreased to 50.7% from 63%.
Technically, the USD/INR held above the 20-day Exponential Moving Average, with key support and resistance levels at 87.07 and 89.12, respectively.
We see the USD/INR pair trading near its all-time high of 89.10, even with the US dollar showing some short-term weakness. This is largely because our own inflation numbers are falling, with the WPI dropping 1.21% in October after a similarly low CPI reading. This points to a potential interest rate cut by the Reserve Bank of India (RBI) next month, which would naturally put more pressure on the Rupee.
The situation is made more complex by foreign investors pulling money out of our stock market. Data from the National Securities Depository Limited (NSDL) shows that foreign institutional investors have sold over $2.5 billion in Indian equities so far in November 2025. This sell-off, which started back in September, continues as long as the US-India trade deal remains unresolved.
Anticipated Market Movements
On the other side of the trade, everyone is waiting for a flood of delayed US economic data following their recent government shutdown. We think the market is bracing for bad news, especially in the upcoming Non-Farm Payrolls and retail sales figures. Any significant weakness there could rapidly increase bets on a Federal Reserve rate cut and weaken the dollar.
This uncertainty creates a difficult environment for simple directional bets, as the pair could swing sharply either way. We’ve seen the India VIX, a key measure of market volatility, climb from 12 to over 16.5 in recent weeks, showing that options are pricing in bigger moves. This suggests strategies that profit from volatility itself, like buying straddles or strangles on the USD/INR pair, could be more prudent than just picking a side.
We also cannot ignore the RBI, which has been actively selling dollars to keep the Rupee from breaking past 89.10. Looking back, we know the RBI has a substantial war chest, with forex reserves reported above $620 billion earlier in the year, giving them significant firepower for intervention. This means traders should be cautious about being aggressively long on the USD/INR pair, as the central bank is providing a strong resistance level for now.
