The Indian Rupee (INR) traded lower against the US Dollar (USD) on Thursday, reaching near 90.30, despite the Reserve Bank of India (RBI) selling US Dollars aggressively on Wednesday to counteract market movements. This intervention came as Indian importers took advantage of USD/INR corrections, driven by trade tensions between the US and India, with tariffs on imports from New Delhi having been increased to 50% due to oil purchases from Russia.
Ongoing trade tensions have reduced interest in the Indian equity market, resulting in Foreign Institutional Investors (FIIs) being net sellers for most of 2025, selling shares worth Rs. 4,650.39 crore this January alone. Despite solid US ISM Services PMI data, US ADP Employment Change and JOLTS Job Opening figures fell short of expectations, raising speculation about potential Federal Reserve interest rate cuts.
Usd Inr Technical Analysis
The USD/INR pair moved higher towards 90.35, testing technical levels like the 20-day Exponential Moving Average (EMA) at 90.2025. The US labour market, monitored through indicators like Nonfarm Payrolls, presents a volatile picture, with expectations for the December report suggesting a slight decline in job additions to 60K, alongside an anticipated unemployment rate decrease to 4.5%. This data is critical as it influences Federal Reserve monetary policy and, thereby, currency movements.
The immediate focus for us must be the US Nonfarm Payrolls report coming out this Friday. The surprisingly strong services PMI data from December 2025 is at odds with the weaker ADP and JOLTS job numbers, creating significant uncertainty. This kind of conflicting data often precedes major volatility, so we should be prepared for a sharp move in the US Dollar in either direction.
With the upcoming payrolls report, we are looking at options strategies that benefit from a spike in volatility, rather than taking a simple directional bet. We are considering long straddles or strangles on the USD/INR pair to capture a potential breakout, regardless of the direction. Implied volatility on one-week options has already climbed to 9.5%, reflecting the market’s anticipation of a significant price swing post-announcement.
Market Sentiment and Future Direction
Beyond this week’s data, the bigger picture still points to a weaker Rupee in the medium term. The consistent selling by Foreign Institutional Investors, who pulled over Rs. 95,000 crore from Indian equities in 2025, shows a deep-seated lack of confidence that the RBI’s interventions cannot fix alone. Therefore, we see any Rupee strength as a temporary correction and an opportunity to build long USD/INR positions.
We are advising importers to use the current levels to hedge their dollar payables for the coming months, as the path of least resistance for USD/INR seems to be upward. A sustained break above the 90.35 mark would likely trigger a move toward the all-time high of 91.55, especially if trade rhetoric from Washington intensifies. Recent banking data shows importer hedging ratios have already climbed to 70% for near-term payables, indicating widespread concern about further Rupee depreciation.
