The Indian Rupee held steady against the US Dollar around 88.70 after previous losses. The Reserve Bank of India’s interventions are preventing the Rupee from falling to its record low of 88.87. Traders are focusing on India’s Consumer Price Index data, with inflation expected to ease to 1.7%, possibly impacting monetary policy.

In recent sessions, the Rupee benefited from optimism about India-US trade talks and steady foreign institutional inflows. The US Dollar Index remains subdued, trading at 98.90, with the US government shutdown affecting sentiment. The preliminary University of Michigan Consumer Sentiment Index showed a slight decrease to 55.0 for October.

USD INR Technical Analysis

USD/INR testing the nine-day Exponential Moving Average of 88.70 suggests a bullish bias. A rise above 88.87 could lead to exploring around 89.50, while a drop below 88.70 might test the lower boundary at 88.51. India’s economy, averaging 6.13% growth since 2006, attracts considerable foreign investment. Oil prices and inflation also impact the Rupee’s value, affecting trade balances and monetary policy.

India’s trade deficit often prompts significant US Dollar demand, pressuring the Rupee. Increased volatility or high import volumes can result in Rupee weakening. The article ends with a legal disclaimer emphasizing the importance of conducting thorough research before engaging in financial investment activities.

We see the USD/INR pair holding steady around 88.70, a level that is acting as immediate support. The Reserve Bank of India is actively intervening to defend the rupee, preventing it from hitting its all-time low of 88.87 seen last month. This creates a tense balance for traders, as the central bank’s actions are currently counteracting underlying market pressures.

The Indian Consumer Price Index (CPI) data for September, due later today, is the most critical upcoming event. Expectations are for a soft inflation reading of 1.7%, which would fall well below the RBI’s target range and increase the probability of interest rate cuts. We should therefore consider positioning for a weaker rupee, as rate cuts would reduce the currency’s appeal to foreign investors.

To add context, we’ve seen foreign institutional investors as net buyers of Indian equities since early October, providing some support for the rupee. However, FII flows can be fickle, and looking back at the volatility in flows during the first half of 2024, a reversal could happen quickly if domestic policy turns more dovish. India’s recent trade deficit figures, which widened in the August 2025 report to over $25 billion, also continue to create underlying demand for US dollars.

US Dollar Challenges

On the other side of the trade, the US Dollar is facing its own significant headwinds. The ongoing US government shutdown is creating uncertainty and delaying payments, which historically puts pressure on the dollar as seen during the prolonged shutdown of 2018-2019. This political turmoil is compounding the market’s expectation for aggressive monetary easing from the Federal Reserve.

Market pricing, reflected in the CME FedWatch Tool, shows a near-certainty of a Fed rate cut this month, with another highly probable in December. This dovish stance from the US central bank is a major factor weighing on the dollar index (DXY). This suggests that any strength in the USD/INR pair might be more about rupee weakness than broad dollar strength.

Given these conflicting drivers, we are watching the 88.70 support level very closely. A decisive break below this, perhaps triggered by a resolution to the US shutdown, would open the door to test the monthly low of 88.51. Conversely, a low inflation print from India could easily propel the pair to re-test the record high of 88.87.

The price of oil remains a key external risk that we must monitor. With Brent crude prices having climbed over 8% in the last quarter to trade above $95 per barrel, India’s import bill is rising. This dynamic consistently weighs on the rupee and could provide a sustained tailwind for a higher USD/INR, regardless of other factors.

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