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VT 
The Indian Rupee steadies against the US Dollar as the USD/INR pair remains around 85.55. Traders anticipate a trade agreement between India and the US before a tariff deadline on 9 July. The US Dollar Index eases slightly below 97.00, and US markets close for Independence Day.
A report suggests India and the US might announce a trade agreement in 48 hours. Both countries aim to reduce duty barriers, promoting competition, while India intends to protect its agriculture and labour sectors from US firms. The US President indicated an agreement that allows US companies to enter India with lower tariffs.
Foreign Investors Impact
Foreign Institutional Investors have been selling Indian equities, amounting to Rs. 5012.95 crores, as they lighten positions before the tariff deadline. Nifty and Sensex trade slightly lower amidst these expectations. President Trump plans additional import duties on nations without a trade deal.
US job data showed stronger-than-expected hiring, with 147K jobs added. Public sector hires surpassed private additions, influenced by tariff uncertainties. Deteriorating labour markets may prompt the Federal Reserve to consider lowering interest rates. Traders have reduced Fed rate cut bets following the positive job data.
The USD/INR pair faces downward pressure, staying below key averages. Support lies around 85.10, with resistance at 86.13. The current trend remains bearish with RSI indicating further downside potential.
The rupee’s recent performance, holding steady around 85.55 against the dollar, appears to reflect the latest sentiment surrounding upcoming trade developments. The talk of a potential agreement between India and the United States, possibly within the next two days, is certainly a focal point. Should it happen before the 9 July tariff deadline, there may be temporary relief for capital markets. However, the details, especially regarding agriculture and labour protection clauses, will determine how this filters into expectations on trade volumes and foreign investment inflows.
There’s also the broader context — investors from overseas have been steadily reducing exposure to Indian equities, with over Rs. 5000 crore offloaded. It’s not uncommon to see institutional capital leave amid uncertainty. But this is not indiscriminate selling; it’s methodical. These investors appear to be hedging against further deterioration in global trade conditions in case the talks fail. This withdrawal of equity support can weigh on domestic indices, especially sectors sensitive to global growth and trade.
Market Reactions and Sentiment
The Nifty and Sensex inching lower aligns with this outlook. There is little fresh buying to offset the outflows, probably because participation remains muted ahead of a major policy cue. That said, if US-India negotiations produce low-tariff arrangements favouring technology or manufacturing imports, infotech and capital goods stocks may stabilise faster. On the flip side, sustained delays would only exacerbate the outflow trend.
The movements in the dollar index during the US holiday, nudging just below 97.00, were minimal. But even marginal changes here carry weight for rupee pairs. It’s worth noting that softer dollar behaviour typically coincides with stronger commodity and forex sentiment across Asia, which may offer a buffer to any near-term rupee weakness.
Labour data coming out of the US showed 147,000 jobs added — which, on its own, looks healthy. However, the weight of those numbers skews towards government hiring. It looks more like precautionary placement than organic demand growth, and that’s likely tied to reactions around trade tensions. It’s clear that private firms are holding back, unsure about what to make of incoming tariffs. As a result, speculation around a Fed rate adjustment has been dialled back.
We think most of this will keep the USD/INR pair under mild pressure. The price action suggests it’s struggling to break above resistance at 86.13, while short-term support around 85.10 could be retested if flows keep exiting equities. The technical bias stays negative — RSI readings below the midpoint hint at further loss in momentum. For those in derivatives, this opens up considerations. Option markets may reflect a wider spread on strike levels if implied volatility ratchets up closer to the tariff deadline.
What’s also likely: smaller position sizes might soon dominate, with market participants aiming to reduce delta exposure in case of a policy surprise. That approach — less exposure but wider hedges — seems cautious yet rational given the timeline. Expect currency futures to reflect this stance, particularly if there’s no announcement from either side within the week.
At the moment, all eyes remain fixed on whether any firm commitments emerge before 9 July, and if they do, whether the rupee has room to rebound, or whether markets simply reprice newer risks ahead.
