The Indian rupee strengthened against the US dollar on Friday, trading near the prior session’s two-month high of 94.29, as inflows via the Reserve Bank of India’s Foreign Currency Non-Resident scheme supported the currency and US rate expectations softened. The RBI disclosed it had raised $136.38bn through foreign-exchange mobilisation schemes, including the FCNR(B) window launched in early June, adding to reserve buffers and intervention capacity. In the US, Federal Reserve governor Christopher Waller said recent data showed signs of disinflation, which pushed the dollar lower and reset pricing for the September meeting.
Derivatives pricing shifted, as the CME FedWatch tool implied a one-in-two chance of a September hike, down from one-in-three before Waller’s remarks. Markets now await August nonfarm payrolls at 12:30 GMT after ADP showed +38k private jobs versus a +47k consensus and +46k in July, its weakest since January, while unemployment is seen steady at 4.1% and estimates point to 56k jobs after 23k layoffs in July. USD/INR traded at 94.4925, below the 100-day SMA of 95.2909, with RSI near 28 and 94.08 in focus; Waller’s FXS Speechtracker score was 6.1 versus a 6.3 average, while the FXS Fed Sentiment Index fell 2.06 to 125.38.
Near-Term Outlook and Tactical Positioning
We should position ourselves for continued near-term downside in the USD/INR pair, but remain highly tactical due to oversold conditions. With the pair trading below its 100-day Simple Moving Average of 95.2909, the path of least resistance is lower toward the key support level at 94.08. However, because the Relative Strength Index has dipped to an oversold level of 28, we must expect brief corrective bounces where we can reload short positions.
Trading Strategies and Event Risk
To capture this trend, we recommend derivative traders utilize bear put spreads or short-call strategies to benefit from the downward momentum without overexposing to sudden volatility. The Reserve Bank of India’s robust intervention capacity, bolstered by a massive $136.38 billion raised through FX mobilization schemes, suggests that any upward spikes in USD/INR will be heavily capped. Historically, when the RBI boasts such substantial reserves—which recently reached historic highs of over $680 billion—the central bank actively dampens rupee volatility and limits sharp rupee depreciation.
Furthermore, we must prepare for heightened volatility around the upcoming U.S. macroeconomic releases, particularly the non-farm payrolls and inflation data. Since the market is pricing in a split one-in-two chance of a Federal Reserve rate hike in September, any deviation from the projected 56,000 job additions will trigger sharp swings. We can capitalize on this uncertainty by trading short-term straddles or strangles on USD/INR options to profit from the implied volatility expansion before these key data releases.
