The Indian Rupee opened lower against the US Dollar at the start of the week, with USD\/INR rising to about 90.70. The move followed Foreign Institutional Investors selling shares worth Rs. 7,395.41 crore on Friday, as IT stocks fell amid concerns about AI disruption.<\/p>\n
The Rupee also faced pressure from expectations of higher oil prices linked to US-Iran tensions. India\u2019s WPI inflation for January rose to 1.81% YoY, above estimates of 1.25% and December\u2019s 0.83%.<\/p>\n
The US Dollar held steady, with the Dollar Index (DXY) trading near 96.95. Markets still see the Fed keeping rates in the 3.50%-3.75% range, according to the CME FedWatch tool.<\/p>\n
US headline inflation eased to 2.4% YoY from 2.7% in December. Monthly CPI rose 0.2%, below estimates and the prior 0.3%.<\/p>\n
In India trading on Monday, USD\/INR stayed near 90.70 and struggled to move above the 20-day EMA around 90.73. The 14-day RSI remained within 40.00-60.00, and levels to watch include 90.00 on the downside and 91.25 on a break higher.<\/p>\n
We are seeing significant pressure on the Rupee, driven by foreign investors pulling out of the IT sector due to AI disruption fears. This outflow mirrors the trend we observed back in 2023 when FIIs withdrew over $3.4 billion in a single month amid global uncertainty. For now, the USD\/INR pair is hovering just under the key 90.73 resistance level.<\/p>\n
Adding to the weakness are rising oil prices from US-Iran tensions, a major concern for an import-dependent economy like India. Historically, similar geopolitical flare-ups in the Strait of Hormuz have caused Brent crude to jump over 8% in a matter of weeks, a pattern which could repeat. This external pressure makes holding Rupees less attractive right now.<\/p>\n
Domestically, the unexpected jump in wholesale inflation to 1.81% could make the Reserve Bank of India cautious, further weighing on sentiment. Meanwhile, the US Dollar remains firm as the Federal Reserve is hesitant to cut rates, a situation very similar to early 2024 when sticky services inflation kept monetary policy tight. This combination of local inflation and a strong dollar puts a floor under the USD\/INR exchange rate.<\/p>\n
Given this backdrop, traders could consider buying call options on USD\/INR with a strike price around 91.00, anticipating a break above the 90.73 technical level. This strategy provides upside exposure to a weakening Rupee while capping the maximum loss at the premium paid. Hedging existing Rupee receivables by entering into forward contracts around the current 90.70 level also seems prudent.<\/p>\n
However, we note the Relative Strength Index suggests a lack of strong momentum, indicating the pair could remain in a range for now. If the 90.73 resistance holds firm, selling out-of-the-money call options with a strike near 91.25 could be a viable strategy to earn premium. This play benefits if the Rupee avoids further significant depreciation and the pair consolidates below that level.<\/p>\n
Traders should also watch for any signs of FII selling abating, which could trigger a reversal. If the pair fails to break higher and instead falls, a move towards the strong psychological support at 90.00 becomes likely. In that scenario, buying put options would be the way to position for a strengthening Rupee.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Rupee opens weaker near 90.70 as FII outflows, oil worries, and inflation data support dollar strength.<\/p>\n","protected":false},"author":62,"featured_media":16967,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41975","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41975","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41975"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41975\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16967"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41975"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41975"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41975"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}