Insights 
VT 
The Indian Rupee continues to lose ground against the US Dollar amid increasing geopolitical tensions following India’s strikes under “Operation Sindoor.” These actions were taken after a deadly militant attack in Kashmir, with Pakistan responding by denying involvement and condemning the strikes. Meanwhile, the Reserve Bank of India may intervene to stabilise the market if volatility persists.
The USD/INR pair may face resistance due to India’s low dependence on exports, offering some cushion against US tariffs. Limited capital outflows have supported the INR, although rising US growth concerns have impacted oil prices, a key component of India’s imports. Despite this, India’s inflation rate has recently fallen to its lowest in over five years, while GDP growth has moderated, prompting the RBI to focus on growth concerns.
Us Economic Overview
In the US, the Dollar appreciates as the Federal Reserve is expected to keep interest rates unchanged amidst tariff-related uncertainty. Traders are closely observing upcoming high-level US-China negotiations following recent economic data indicating strength in the services sector. Meanwhile, India is conducting a nationwide mock drill in preparation for potential hostile attacks amid heightened tensions with Pakistan.
The USD/INR pair trades near 84.60, with support seen near 84.10 and resistance around the nine-day Exponential Moving Average at 84.69. A movement beyond these levels could influence the pair’s short-term outlook.
Given what we see now, the Dollar’s strength is being powered largely by the Federal Reserve’s stance — staying firm on rates despite ongoing concerns about tariffs and trade discussions, particularly with China. Powell maintains the central bank’s cautious posture, holding off on rate cuts even with mixed signals from the broader economy. Service sector data showed resilience, reinforcing this “wait and see” approach rather than spurring urgency for any adjustments.
That naturally affects how we approach the Dollar from here — especially as it finds underlying support from these interest rate expectations. No sudden easing means no notable pullback in yield-driven flows. For those of us watching the USD/INR pair, that stability on the US side keeps the pressure tilted slightly upward unless something new pushes the Rupee the other way. At the same time, the Dollar refusing to back down also discourages aggressive bids on INR from overseas investors.
Domestic Monetary Policy And Market Reactions
Turning our attention to the domestic space, RBI’s hesitation to act hastily on rates, particularly after softer inflation data, deserves a look. A five-year low on consumer pricing theoretically gives the central bank more room to loosen policy. Still, current caution suggests that preserving currency stability takes precedence — particularly with military pressures adding new layers of uncertainty. Domestic bond yields reflect this tension. Even though growth has cooled, the central bank stays methodical.
The market’s perception of the Rupee as relatively shielded from external shock — thanks to India’s internal demand focus and modest export reliance — has provided a buffer. But if energy prices start ticking up again, propelled by stronger global demand or refining bottlenecks, that cushion thins out quickly. A jump in oil would stretch the current account, reigniting concerns that had momentarily quieted.
On a technical basis, support around the 84.10 level continues to hold for now, suggesting that buyers remain active just above that line. The resistance at the nine-day EMA around 84.69 has capped recent rallies, but it’s not a firm ceiling. If the pair edges beyond that level — decisively — it opens the door to a move beyond 85 in a fast market. Still, such a break requires either a renewed Dollar surge or a stumble in local confidence.
From where we sit, direction in the coming sessions likely hinges not only on policy or data but on how these heightened military tensions evolve. India’s mock drills may suggest preparation rather than escalation, but the psychological drag on investor sentiment shouldn’t be downplayed. In times like these, shorter-term hedging strategies tend to see more volume. Dated options and forward spreads have already reacted slightly, with premium costs nudging higher compared to last week.
We remain attentive to the combined effects of political severity, central bank restraint, and international negotiation noise. Each of these variables has a way of jolting short-term positioning even without big headlines. The message from the options market is clear — protection is being priced in both ways, with slightly heavier interest on the upside for the Dollar, reflecting caution rather than a directional bet.
That said, short-term trades attempting to front-run any RBI action or price in a policy shift based solely on recent inflation readings may find the risk-reward skewed. The longer hike-volatility holds, the more defensive flows we can expect, particularly if data out of the US continues to impress. Spread widening between US and Indian 10-year yields also plays into this, and we’re watching that carefully.
All told, the USD/INR price zone now stands at a technically and politically reactive point. While a breakout remains possible, momentum will depend not just on external evidence but also on whether domestic events calm down or take a sharper turn.
