The Indian Rupee moved higher against the US Dollar, reaching near 90.08 in a low-volume trading day. Over this month, Foreign Institutional Investors (FIIs) have been net sellers in 17 out of 20 days, withdrawing Rs. 26,908.22 crore from Indian equities.<\/p>\n
The USD\/INR pair’s near-term bias remains upward due to ongoing foreign outflows. Trade tensions between the US and India persist, with the US imposing 50% tariffs on Indian imports. Negotiations are ongoing, but no agreement has been announced.<\/p>\n
The Federal Reserve’s recent policy meeting led to a 25 basis point rate cut to 3.50%-3.75%. This was the third consecutive cut, with future monetary conditions expected to loosen further. The Fed’s projections suggest a single rate cut next year, though market expectations differ.<\/p>\n
Technically, USD\/INR holds close to its 20-day Exponential Moving Average of 90.20, indicating ongoing demand. The Relative Strength Index is neutral at 54, signaling balanced market momentum. Maintaining levels above the 20-day EMA could lead to further gains, while dropping below may lead to consolidation.<\/p>\n
The Federal Reserve impacts the US Dollar through interest rate adjustments aimed at price stability and full employment. Quantitative Easing may weaken the Dollar, while Quantitative Tightening could strengthen it. The Fed meets eight times annually to decide on monetary policy.<\/p>\n
We see the Rupee gaining a little today, but this looks like a short-term move in a quiet holiday market. The persistent selling by Foreign Institutional Investors, which has now drained over Rs. 26,900 crore this month, points to underlying weakness. This level of outflow is significant, reminiscent of the heavy selling we saw in some months back in 2023.<\/p>\n
This investor flight is tied to the unresolved trade issues with the US, which continue to create uncertainty. We are watching the Q3 trade deficit figures due out today, as a wider deficit would add more pressure on the Rupee. Considering the trend we saw in the first half of 2025, we anticipate the Q3 number could exceed $75 billion, further supporting a bullish case for USD\/INR.<\/p>\n
On the other side of the pair, the US Dollar is waiting for the FOMC minutes for direction in early 2026. There is a clear disagreement between the Fed\u2019s projection of one rate cut next year and the market, which is pricing in at least two. As of this week, the CME FedWatch Tool shows a greater than 60% probability of a second rate cut by September 2026, a gap the minutes might clarify.<\/p>\n
The biggest source of uncertainty for the Dollar is the looming announcement of a new Fed Chair in January. A candidate like Kevin Warsh would be seen as more aggressive on inflation, potentially limiting rate cuts and boosting the Dollar. This political decision is a major wildcard, suggesting that buying options to trade the expected volatility could be a prudent strategy.<\/p>\n
For now, the technical picture supports staying long on the US Dollar against the Rupee. We should use the 20-day moving average around 90.20 as a key support level to add to positions or place stops. The primary target in the coming weeks remains a push towards the all-time high of 91.55.<\/p>\n
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