Insights 
VT 
The Indian Rupee has been fluctuating within the 88.76-89.11 range against the US Dollar. The Reserve Bank of India continues to intervene to stabilise the currency and prevent it from breaching the all-time high of 89.11. The Indian currency’s volatility is expected to increase if the RBI lessens its market support.
Trade Negotiations With The Us
The competitiveness of Indian goods in global markets has decreased due to US tariffs. The US has imposed a 50% import duty on Indian products as a penalty for India’s oil purchases from Russia. Commerce and Industry Minister Piyush Goyal remains optimistic about trade negotiations with the US.
Overseas buyers have injected Rs. 81.28 crores into the Indian stock market, marking small gains. The Indian Rupee’s performance against other currencies varies, with it being strongest against the US Dollar. The US Dollar Index regained early losses, heavily influenced by political events in Japan and France.
The Federal Reserve’s direction remains closely watched, with the FOMC signalling that a pivot to neutral rates could be imminent. The US government shutdown poses a threat to economic stability. The USD/INR remains in a sideways trend, between 88.76 and 89.11, with technical indicators suggesting a bullish momentum for now.
The Indian Rupee is currently locked in a narrow range against the US Dollar, trading between 88.76 and 89.11, largely because the Reserve Bank of India is actively selling dollars. This intervention is keeping volatility low, but we expect a significant price move once the RBI steps back. The main challenge for the Rupee remains the 50% US import tariffs, which are hurting the competitiveness of Indian exports.
The RBI’s defense of the Rupee is backed by considerable firepower, as we saw India’s foreign exchange reserves climb back above $620 billion in recent months, a level reminiscent of early 2024. This strong position means the central bank can likely continue to cap the USD/INR pair below the 89.11 high for now. This stability has suppressed near-term option prices, making them appear cheap.
Domestic And Global Economic Pressures
However, fundamental pressures are building against the Rupee, including domestic inflation which we’ve seen hover around 5% for much of 2025, well above the RBI’s 4% target. A potential trade deal with the US before the November deadline offers hope, but negotiations are stalled due to the US government shutdown. This uncertainty suggests that the path of least resistance for the Rupee is still towards weakness.
On the US side, the Dollar Index is strong near a two-month high of 99.00, but faces headwinds from the dovish Federal Reserve meeting minutes released yesterday. Traders are pricing in a 78.6% chance of another rate cut by December, according to the CME FedWatch Tool. Today’s speech by Fed Chair Jerome Powell will be critical for the Dollar’s next move.
Foreign investor flows offer little support, as the net purchase of Rs. 81.28 crores on Wednesday is insignificant compared to the multi-billion dollar monthly inflows we witnessed in the first half of 2025. This shows that large investors are likely waiting for more clarity before committing significant capital. The current quiet period feels like a prelude to a larger move.
Given this compressed environment, the most prudent strategy is to prepare for a breakout in volatility. Buying long-dated straddles or strangles is an effective way to position for a sharp move out of the current 88.76-89.11 range, regardless of the direction. These derivative positions are relatively inexpensive due to the current low implied volatility but could yield substantial returns once the coiled spring finally releases.
