The Indian Rupee remains stable against the US Dollar, staying around 88.80 at the week’s start. The US Senate has approved a bill to end the US government shutdown, lasting nearly 40 days, with a stopgap bill funding until January.
The US Dollar Index, indicating the Dollar’s value against major currencies, hovers around 99.65. The passage of the US bill avoids any new fiscal instability, with the Indian Rupee unfazed by the recent developments in the US.
Foreign Institutional Investment Insights
In the Indian market, Foreign Institutional Investors (FIIs) have shown buying activity, purchasing shares worth Rs. 4,581.34 crore last Friday. The Indian Rupee has appreciated against its major peers due to this influx of overseas investment.
India’s Consumer Price Index (CPI) for October will be released, with expectations for a slower growth rate of 0.48%. Analysts anticipate this softer growth due to a decline in food prices, influencing potential monetary policy easing by the Reserve Bank of India.
The USD/INR pair remains around 88.80, above the 20-day EMA of 88.63. The 14-day RSI is also a focus, with a move above 60.00 potentially sparking new bullish momentum. Support is seen at 87.07, with resistance at the high of 89.12.
With the end of the US government shutdown, a major source of uncertainty for the US Dollar is now removed. We saw a similar situation during the long shutdown in 2018-2019, where the dollar initially dipped before finding its footing. For now, the USD/INR pair is holding steady around 88.80, suggesting the market is pausing to see what comes next.
India’s Economic Outlook
The most critical event for us in the coming days is India’s inflation data. The market expects a Consumer Price Index reading of just 0.48%, which would be a dramatically low figure, especially when we remember the persistent 5-7% inflation rates we grappled with back in 2023 and early 2024. This sharp drop in price pressures will dominate trading decisions this week.
Such a low inflation number would give the Reserve Bank of India a clear green light to cut interest rates again to stimulate the economy. The RBI has already cut its repo rate by 100 basis points in 2025, bringing it down to 5.5%. Another cut would likely put downward pressure on the Rupee, pushing the USD/INR pair higher.
Derivative traders should consider buying USD/INR call options with strike prices approaching the all-time high of 89.12. These options provide a way to profit if the Rupee weakens following a soft inflation report, while capping potential losses. The expected spike in volatility around the data release could also make strategies like straddles attractive.
We must also watch the actions of Foreign Institutional Investors, who surprisingly turned into net buyers last week. We saw how powerful these flows can be back in 2023, when FIIs poured over $21 billion into Indian equities, providing a strong floor for the Rupee. Any sustained buying from foreign funds could counteract the negative pressure from a potential RBI rate cut.
From a technical standpoint, the pair is trading just below its record high, making it a critical juncture. Traders using futures could look to establish long positions on USD/INR, but should place tight stop-losses below the 20-day moving average of 88.63. A decisive break above the 89.12 resistance level would signal a new phase of Rupee weakness.
