Insights 
VT 
The Indian Rupee rose against the US Dollar, bringing the USD/INR down to near 88.00, amid US import tariffs’ threat. Meanwhile, closures in Indian currency markets occur due to holidays, with a trading break spanning Tuesday and Wednesday.
The USD/INR approached 87.90, despite US President Trump cautioning that tariffs on Indian imports remain unless India ceases Russian oil purchases. Previously, the Indian government dismissed Trump’s claim about ending oil imports from Russia.
Trade Tensions And Tariff Impacts
India’s purchasing of Russian oil has contributed to trade tensions with the US. Consequently, tariffs on imports from India rose to 50%, depreciating the Indian Rupee significantly and causing foreign fund outflows from the stock market.
This month, Foreign Institutional Investors have decreased their equity sales in India, with October sales at Rs. 586.76 crores. However, this figure is lower than the sales recorded in the previous quarter.
US-China trade tensions eased after President Trump suggested that 100% tariffs on Chinese imports were unsustainable. A meeting between Trump and Xi Jinping is expected to be favourable for both.
Technical analysis shows the USD/INR struggled with the 50-day EMA as support, with the relative strength index dropping further. A significant support level remains at 87.07, with resistance posed by the 20-day EMA.
Rupee Strength And Upcoming Market Dynamics
The Rupee’s recent strength, pushing USD/INR towards 88.00, presents an interesting setup for the coming weeks. With Indian markets closing for Diwali, we anticipate reduced liquidity which could amplify any moves caused by international news. Traders should be cautious of potential price gaps when markets reopen later this week.
We see the primary risk as the unresolved tariff situation with the US over India’s Russian oil imports. While President Trump’s threats could easily push USD/INR higher, this is offset by the significant slowdown in Foreign Institutional Investor (FII) outflows. Recent data from the National Securities Depository Limited (NSDL) confirms FIIs were net neutral in the first half of October 2025, a stark contrast to the heavy selling we saw in the third quarter.
A softer US Dollar Index, currently near 98.45, adds to the pressure on the USD/INR pair. This dollar weakness is fueled by market expectations of an aggressive Federal Reserve, with the CME FedWatch tool now pricing in a near 70% chance of a 50 basis point cut by year-end. We’ve seen in past easing cycles, like the one in 2019, how this typically boosts emerging market currencies against the dollar.
The upcoming meeting between US and Chinese officials is a key event to watch this week. Any positive developments on trade, especially concerning rare earth minerals, will likely improve global risk appetite and benefit the Rupee. A favorable outcome could see USD/INR test its August 2025 low of 87.07.
From a technical standpoint, the USD/INR’s failure to reclaim the 50-day EMA at 88.13 suggests that selling pressure remains. This makes writing call options with strike prices above 88.25 an attractive strategy to collect premium while the pair consolidates. The low RSI reading below 40 indicates that momentum is currently with the bears.
Given the conflicting signals between US tariff threats and a dovish Fed, we expect implied volatility in USD/INR options to remain elevated. Traders with existing currency positions should consider buying puts to hedge against a sudden drop driven by positive US-China news or a weaker dollar. This strategy allows for participation in further Rupee strength while defining risk.
