Insights 
VT 
The Indian Rupee lost its early gains against the US Dollar, closing near 88.80 after the Reserve Bank of India’s intervention. The RBI acted as the USD/INR pair neared its high around 89.10, which could pressure importers.
Foreign Institutional Investors have been net sellers in the Indian stock market for four months, though October’s stake paring of Rs. 2,346.89 crores was less than the Rs. 43,290.32 crores average from July to September. In November’s start, foreign investors sold shares worth Rs. 1,883.78 crores.
The US Dollar’s Recent Strength
The US Dollar strengthened, reaching a three-month high near 100.00 against major currencies. The probability of a Fed rate cut in December has decreased from 94.4% to 67.3%.
The USD/INR pair climbed back in trading, settling near 88.80, recovering from near the 20-day Exponential Moving Average of 88.54. The August low of 87.07 and the high of 89.12 are key levels for the pair.
The Federal Reserve, through its meetings and policies like Quantitative Easing and Tightening, influences the US Dollar’s strength. QE tends to weaken the Dollar, while QT usually strengthens it. The Fed aims for price stability and full employment by adjusting interest rates.
We are seeing a classic standoff between the Reserve Bank of India and broader market forces. The RBI’s recent intervention to defend the Rupee as it neared its all-time high of 89.10 shows they are serious about preventing a disorderly depreciation. With India’s foreign exchange reserves reported at a healthy $650 billion in late October 2025, they have the capacity to continue these actions for some time.
Primary Headwinds for the Rupee
The continued selling by Foreign Institutional Investors (FIIs) is the primary headwind for the Rupee. After pulling out an average of over Rs. 43,000 crores per month between July and September of 2025, the selling has persisted into November. This pattern of capital outflow from emerging markets is something we’ve seen before, notably during the Fed’s aggressive tightening cycle in 2022, and it consistently weighs on the domestic currency.
On the other side of the equation, the US Dollar is showing renewed strength, with the Dollar Index recently touching a three-month high near 100.00. Market expectations for a December rate cut have pulled back sharply, with the latest CME FedWatch tool showing probabilities falling below 70%, a significant drop from over 94% just a week ago. The just-released October 2025 ADP employment report, which showed a gain of 150,000 jobs against an expectation of just 24,000, only reinforces the Fed’s data-dependent, cautious stance.
This environment suggests option strategies that can capitalize on either a period of range-bound price action or an eventual breakout. Selling out-of-the-money call options with strike prices above 89.50 could be a viable strategy to bet on the RBI’s short-term success in capping the upside. Alternatively, for those who believe the pressure will eventually lead to a sharp move, purchasing a straddle could prove profitable if the pair breaks significantly in either direction.
In the coming weeks, our focus should be on daily FII flow data and any further signs of RBI intervention, as these will dictate short-term movements. The most critical upcoming event will be the next US inflation report, as this will heavily influence the Fed’s final decision in December. Any surprise in that data could easily overwhelm the RBI’s efforts and force a re-evaluation of our current positions.
