Insights 
VT 
The Indian Rupee lags against the US Dollar as the Dollar Index rises by 0.25% to near 99.00. The USD/INR pair trades around 88.40, with US monetary policy updates and trade tensions affecting sentiment.
Market observers expect the Federal Reserve to announce a 25-basis-point interest rate cut. This could bring the Federal Fund rate to 3.75%-4.00%, influencing the US Dollar’s trajectory.
Foreign Institutional Investment Trends
Foreign Institutional Investors recently invested Rs. 10,339.80 crores in Indian equities, contrasting with outflows from July-September of Rs. 1,29,870.96 crores. Reduced trade tensions between the US and India have improved sentiments, following easing tariffs.
Globally, attention turns to US-China trade talks, with possible tariff rollbacks expected. The Indian Rupee shows varied performance against major currencies, notably strengthening against GBP.
USD/INR struggles to clear the 20-day EMA, around 88.41, with RSI showing buying interest. Key levels are 87.07 on the downside and 89.12 on the upside.
The Federal Reserve’s policies, like interest rate adjustments, impact the US Dollar. The Fed holds eight policy meetings yearly, with measures like Quantitative Easing and Tightening also influencing the currency’s strength. Quantitative Easing weakens the Dollar, while Tightening supports it.
Federal Reserve’s Influence on USD
With the Federal Reserve’s policy announcement imminent, the market has already priced in a 25-basis-point rate reduction. Therefore, our focus should be on the forward guidance for the December meeting. Any hint of a pause could cause a sharp rally in the US Dollar, while a dovish tone confirming further cuts would pressure it lower.
If the Fed signals that more cuts are necessary due to the deteriorating labor market and the ongoing government shutdown, we should prepare for USD/INR to weaken. This scenario would make buying put options or shorting futures a viable strategy to target the August support level of 87.07. Conversely, a hawkish surprise would likely see the pair attempt to break its all-time high of 89.12.
The upcoming Trump-Xi meeting introduces significant event risk, making short-term options attractive. We could consider buying a straddle to profit from a large price swing in either direction, as the outcome of these trade talks remains uncertain. This is purely a play on the expected increase in volatility following the high-stakes meeting.
On the Indian side, the sentiment has clearly improved, as shown by the massive FII inflow of over Rs. 10,000 crores. This reversal from the heavy selling we witnessed in the third quarter of 2025 suggests foreign investors are regaining confidence. This pattern is similar to what we observed in early 2024, when strong capital flows followed signs of political and economic stability.
India’s underlying economic strength provides a solid reason to favor the Rupee in the medium term. With recent real GDP growth forecasts from the IMF holding steady above 6.5%, India remains one of the fastest-growing major economies. This economic divergence supports a fundamentally weaker outlook for the USD against the INR, assuming trade tensions continue to ease.
The technical picture shows the pair trading in a wide range, which offers opportunities for option sellers. With key support at 87.07 and major resistance at the 89.12 high, we can write out-of-the-money puts and calls. Selling puts with a strike below 87.50 or calls with a strike above 89.00 could be an effective way to collect premium.
