The Indian Rupee falls against the US Dollar, with the USD/INR pair reaching approximately 88.47 despite anticipation of a trade deal between the US and India. Negotiators from both countries have reportedly resolved most issues, nearing a legal agreement on the trade pact.

Indian Commerce and Industry Minister Piyush Goyal stresses that India will not rush into a trade deal, preferring to proceed without deadlines. Tensions in US-India trade relations persist after increased US tariffs on Indian imports, linked to India buying oil from Russia.

Indications Of Rupee Stabilisation

There are indications that outflows from the Indian stock market are slowing, potentially stabilising the Rupee. Foreign Institutional Investors have sold Rs. 244.02 crores in shares this month, compared to an average of Rs. 43,290.32 crores over the past three months.

The Indian Rupee is the weakest against the Australian Dollar among major currencies today. Despite lower than expected US CPI data, the Rupee struggles against the Dollar. The US Dollar Index falls by 0.1% but pressure remains due to trade tensions.

The Federal Reserve is expected to cut interest rates by 25 basis points, following soft US inflation data. Meanwhile, trade tensions between the US and China ease, as discussions between leaders suggest a potential deal.

The USD/INR pair hovers near 88.40, finding support at the 20-day EMA with resistance around 88.48. Tariffs are used to protect domestic producers by imposing customs duties on imports. Opinions among economists differ on whether tariffs protect industries or drive prices up in the long term.

Donald Trump’s Tariff Plans

During his presidential campaign, Donald Trump plans to use tariffs to support American producers, focusing on imports from Mexico, China, and Canada. Revenue from tariffs will potentially be used to lower personal income taxes.

As of today, October 27, 2025, the Indian Rupee is showing resilience, trading around 84.20 against the US Dollar. This is a significant strengthening from the 88.47 level seen in past periods of high uncertainty. We see this stability being driven by the Reserve Bank of India’s commitment to fighting inflation and maintaining a hawkish monetary policy stance.

The flow of foreign funds presents a starkly different picture now compared to previous years of volatility. Foreign Portfolio Investors (FPIs) have been net buyers in Indian equities, injecting over $3 billion in the last month alone, according to recent exchange data. This contrasts sharply with the heavy selling we witnessed in the early 2020s, signaling renewed confidence in India’s growth story.

On the US side, the Federal Reserve appears to be holding interest rates steady, a pivot from the rate-cutting cycle discussed years ago. With US core inflation persisting around 2.8%, the Fed is signaling a “higher for longer” approach, which keeps the dollar strong globally. This policy divergence between a hawkish RBI and a steady Fed creates a tense balance for the USD/INR pair.

Trade negotiations have also evolved, moving past the tariff-heavy rhetoric of the mid-2020s. While a comprehensive trade deal with the US remains a work in progress, the dialogue is more constructive, reducing the risk of sudden policy shocks that used to rattle the currency markets. We are not seeing the same level of public friction, which allows for a more predictable trading environment.

For derivative traders, this suggests the USD/INR pair may remain in a tighter range than historical volatility suggests. Selling short-dated options, such as strangles, could be a viable strategy to collect premium from this expected stability. We believe implied volatility in the near-term expiries might be overstating the actual risk, presenting an opportunity for income generation.

Importers and exporters should also pay close attention to the forward markets. The interest rate differential between India and the US has kept forward premiums on the rupee attractive. This provides a valuable opportunity to hedge future payables and receivables at favorable rates, locking in certainty amidst global economic crosscurrents.

Looking ahead in the coming weeks, we will be closely watching the upcoming RBI policy minutes and the next US CPI inflation report. Any surprise in these data points could break the current equilibrium. Therefore, maintaining some long volatility positions through far-out-of-the-money options could serve as a cheap and effective hedge against unforeseen market shifts.

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