Insights 
VT 
The Indian Rupee remains vulnerable, trading around 88.95 against the US Dollar. October saw a foreign outflow of Rs. 2,346.89 crores from the Indian equity market, lower than previous months.
Despite a strong US Dollar Index, climbing to a three-month high of 99.95, the USD/INR struggles to gain further. Foreign Institutional Investors have slowed their selling pace in India.
Reserve Bank Of India And Market Sentiment
The Reserve Bank of India may intervene in the currency market as USD/INR nears its all-time high of 89.12. Trade talks between the US and India have not reached an agreement, impacting market sentiment.
The US Dollar’s strength is supported by doubts over further Federal Reserve interest rate cuts. Chair Jerome Powell’s recent comments suggest a December cut is uncertain, with a probability of 69.3% for a rate cut, down from 91.7%.
Technical indicators show the USD/INR near a high of 88.95, with resistance at the all-time high of 89.12. Tariffs remain a critical point for global trade discussions, with varying views on their impact.
Donald Trump plans to use tariffs to bolster the US economy, targeting trade with Mexico, China, and Canada. This aligns with his strategy during the 2024 US presidential election.
Dollar Strength And Trading Strategy
The Indian Rupee is showing surprising strength, holding its ground below 89.00 even as the US Dollar Index is at a three-month high. While the broader trend for the USD/INR pair is upward, there is significant resistance preventing a new record high. We see this as a battle between a hawkish US Federal Reserve and a slowing of foreign investment outflows from India.
The biggest factor for us to watch in the coming weeks is the potential for the Reserve Bank of India (RBI) to intervene. The pair is approaching its all-time high of 89.12, a level the RBI will likely defend to prevent runaway depreciation. Looking back at India’s foreign exchange reserves, which consistently held above $600 billion through 2023 and 2024, the central bank has more than enough firepower to cap the pair’s upside, making a sustained breakout difficult.
On the other side, the US Dollar remains strong because the market is losing faith in a December 2025 rate cut from the Federal Reserve. Probabilities for a cut have dropped from over 90% to below 70% in just a week, a dynamic we saw play out repeatedly in the 2023-2024 period as inflation proved sticky. This underlying dollar strength provides a solid floor for the USD/INR pair, preventing any significant sell-off.
This creates a classic range-bound scenario, with a strong ceiling around 89.12 and firm support below. For derivative traders, this suggests that selling call options with strike prices at or just above the all-time high could be a viable strategy to collect premium. Alternatively, the tension between these opposing forces could lead to a sharp move, making volatility-based strategies like buying straddles attractive.
We should also remember that foreign investors have now been net sellers of Indian stocks for four straight months, even though the pace slowed in October 2025. This, combined with the lack of progress on a US-India trade deal, creates a cautious backdrop. The slower selling is helping the Rupee for now, but a reversal back to the heavy outflows seen from July to September 2025 would quickly push the pair to test the RBI’s resolve at its all-time high.
