The Indian Rupee opened lower against the US Dollar, with the USD/INR pair reaching near 90.35. This follows strong US Dollar demand by Indian importers after a mid-December sell-off linked to the Reserve Bank of India’s intervention.
The RBI had heavily sold US Dollars to stabilise the Rupee, which had fallen to record lows of around 91.55. The Indian currency has depreciated by over 6% against the US Dollar this year, the worst performance among Asian currencies, even as the US Dollar Index dropped by nearly 9.5%.
Foreign Investor Withdrawal Impact
Foreign Institutional Investors have withdrawn Rs. 24,148.33 crore from Indian equities this December, influenced by high valuations compared to Chinese and Taiwan stocks. This week, focus shifts to the Federal Fiscal Deficit data for November.
The USD/INR daily chart shows the pair at 90.3515, above the 20-day Exponential Moving Average, suggesting a short-term bullish trend. Relative Strength Index at 55 indicates steady momentum. The price maintaining above 90.1934 could support an extension towards the all-time high of 91.50.
FOMC Minutes reveal discussions on US monetary policy, potentially influencing the US Dollar’s direction. The publication is crucial for understanding future interest rate changes.
As of today, December 29th, 2025, the Rupee’s recent strength from the central bank’s intervention is already weakening, with USD/INR climbing back towards 90.35. We see this as a result of persistent US Dollar demand from Indian importers, a situation worsened by India’s trade deficit widening to a reported $30 billion in November 2025. This underlying demand suggests that the path of least resistance for the currency pair is upwards.
Rupee Weakness and Investor Behavior
The broader trend for the Rupee this year has been one of significant weakness, depreciating over 6% even as the US Dollar Index fell. This is largely because foreign investors have been selling Indian assets, with Foreign Institutional Investors (FIIs) pulling out a reported $20 billion from Indian equities in 2025, one of the largest outflows since the 2013 taper tantrum. This selling pressure is a key factor that will likely continue into the new year.
From a technical perspective, the pair holding above its 20-day moving average near 90.19 signals that the short-term uptrend is still active. We believe any dips toward this level could present buying opportunities for traders. This setup makes buying call options or implementing bull call spreads an attractive strategy to capitalize on a potential retest of the all-time highs near 91.50.
We should not expect the Reserve Bank of India to intervene as heavily as it did in mid-December. Defending the currency has been costly, with reports indicating India’s foreign exchange reserves have fallen by over $40 billion in the last quarter of 2025. This dwindling firepower suggests the RBI may allow for a more gradual depreciation, which could lead to higher market volatility.
Looking forward, the upcoming US Federal Fiscal Deficit data this week and the Federal Open Market Committee (FOMC) minutes in a few weeks will be critical. Any hints of a more hawkish stance from the US Federal Reserve regarding its 2026 interest rate policy could further strengthen the US dollar. This would add more upward pressure on the USD/INR exchange rate.
