USD/INR eyes strong opening on Friday amid firm US Dollar

USD/INR sees a firm opening on Friday with the US Dollar strengthening, as Indian currency markets are closed on Thursday due to a public holiday.
Balanced FOMC Minutes and revived risks of US military action in Iran have boosted the US Dollar’s demand.
The US-India trade deal has improved FIIs sentiment toward the Indian equity market.

Sagar Dua FXStreet

The USD/INR pair ended Wednesday’s session on a flat note around 90.90 as investors were awaiting the release of Federal Open Market Committee (FOMC) minutes of the January policy meeting. The pair is expected to open strongly on Friday – Indian currency markets are closed on Thursday due to Chattrapati Shivaji Maharaj Jayanti holiday, equity markets remain open –as the US Dollar (USD) strengthened after the FOMC minutes release. The last ones showed that officials didn’t see any rush for interest rate cuts as the United States (US) inflation has been well above the central bank’s 2% target.

In the Asian trading session on Thursday, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises to near 97.80, the highest level seen in over a week.

According to FOMC minutes, several policymakers reportedly said further rate cuts would likely be appropriate if inflation declined in line with their expectations. In January, US inflation has cooled down at a faster-than-expected pace, but has failed to prompt speculation about more interest rate cuts by the Federal Reserve (Fed) in the near term.

The CME FedWatch tool shows that the Fed will leave interest rates unchanged in the current range of 3.50%-3.75% in the March and April policy meetings.

Meanwhile, the broader outlook of the Indian Rupee (INR) has been improving as the confirmation of a trade deal between the United States (US) and India has prompted sentiment of foreign investors toward the Indian stock market. So far this month, Foreign Institutional Investors (FIIs) have turned out to be net buyers in the majority of trading sessions; however, the overall result shows an outflow of Rs. 196.14 crore from the Indian equity market.

Going forward, the major trigger for the USD/INR pair will be the preliminary US Q4 Gross Domestic Product (GDP) data, which will be released on Friday. The Bureau of Economic Analysis (BEA) is expected to report that the economy expanded at an annualized pace of 3%, slower than 4.4% growth seen in the third quarter of 2025.

On the global front, investors are turning risk-averse due to revived fears of US military action in Iran, which has also strengthened the US Dollar by improving its safe-haven appeal. According to a report from CBS, the US military is ready for possible strikes on Iran as soon as Saturday. Nonetheless, US President Donald Trump has yet to make a final decision on whether to carry out an attack.

Technical Analysis: USD/INR remains calm near 20-day EMA

USD/INR closed Wednesday's session with consolidation around 90.90. The 20-day Exponential Moving Average (EMA) has been bending lower, signaling a softening trend, while price stabilizes just above the average at 90.87 to keep near-term support intact. Over the past few trading days, the pair has been trading in a tight range between 90.18 and 91.00.

The 14-day Relative Strength Index (RSI) at 51 (neutral) reflects balanced momentum after a modest recovery from sub-50 readings. A decisive close below the EMA would tilt the bias bearish and expose further weakness.

Near-term, maintaining bids above the 20-day EMA would allow recovery attempts to extend, whereas a rejection at this dynamic level could trigger another pullback. RSI hovering around its midline leaves momentum non-committal; a push above 50 would align with upside rotation, while a dip back beneath 50 would revive selling pressure.

(This story was corrected on February 19 at 09:00 GMT to explain that Indian currency markets are closed on Thursday due to Chattrapati Shivaji Maharaj Jayanti holiday.)

(The technical analysis of this story was written with the help of an AI tool.)

Indian Rupee FAQs

What are the key factors driving the Indian Rupee?

The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.

How do the decisions of the Reserve Bank of India impact the Indian Rupee?

The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.

What macroeconomic factors influence the value of the Indian Rupee?

Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.

How does inflation impact the Indian Rupee?

Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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