USD/INR opens cautiously as FIIs turn bet buyers on US-India trade deal euphoria
- The Indian Rupee opens firmly against the US Dollar, continuing strength from US-India trade deal confirmation.
- FIIs turned out to be net buyers in the Indian stock market on US-India trade deal euphoria.
- Investors await US data and the RBI monetary policy announcement.
The Indian Rupee (INR) opens on a firm note against the US Dollar (USD) on Wednesday, with the USD/INR pair holding onto losses near 90.55.
The near-term trend of the pair seems fragile as the broader outlook of the Indian Rupee has improved, following the trade deal announcement between the United States (US) and India by President Donald Trump. The acknowledgement of the long-awaited US-India trade deal appears to have improved sentiment of foreign investors toward the Indian equity market.
On Tuesday, Foreign Institutional Investors (FIIs) turned out to be net buyers and purchased stocks worth Rs. 5,236.28 crore, the highest inflow of overseas funds seen since October 28, 2025, Economic Times (ET) reported.
While market participants were cautious about whether the Indian government has sacrificed its “non-compromise” policy on critical sectors, such as agriculture and dairy; Commerce Minister Piyush Goyal has clarified that these sectors were protected from international exposure during negotiations.
Going forward, investors will focus on the Reserve Bank of India’s (RBI) monetary policy announcement on Friday, in which it is expected to leave the Repo Rate unchanged at 5.25%.
Daily Digest Market Movers: US ADP Employment and ISM Services PMI come into spotlight
- The US Dollar trades broadly calm against its other currency peers ahead of the release of US ADP Employment Change and the ISM Services Purchasing Managers’ Index (PMI) data for January, which will be published during the North American session.
- At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades almost flat around 97.45. Still, the DXY is close to its weekly high of 97.73 posted on Monday.
- The US ADP employment report is expected to show that private employers added 48K fresh workers, slightly higher than 41K in December. A slight improvement in the job data is unlikely to provide relief to Federal Reserve (Fed) officials, who have been expressing labor market concerns for months.
- The US ISM Services PMI is seen arriving at 53.5, lower than 54.4 in December, indicating that the service sector activity continued to advance but at a moderate pace.
- Upbeat US data would dampen market expectations for an interest rate cut by the Fed in the near term. Currently, traders seem confident that the Fed will leave interest rates unchanged in the range of 3.50%-3.75% in the March policy meeting, according to the CME FedWatch tool.
- Meanwhile, the US government partial shutdown has ended as House advanced bill to fund federal agencies on Tuesday.
- The US Dollar had a strong rally in the past few trading days, following president Trump nominated Kevin Warsh as new Fed Chairman. The event was positive for the US Dollar, but unfavorable for precious metals and US equities, given Warsh’s preference for a firmer US Dollar in his previous work at the Fed.
Technical Analysis: USD/INR stays below 20-day EMA
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In the daily chart, USD/INR trades at 90.5715. Price holds below the 20-day exponential moving average at 91.0466, which slopes lower and caps rebound attempts. The declining average keeps the near-term trend tilted lower. RSI at 44.82 (neutral) slips beneath the midline, confirming waning upside momentum.
A close back above the 20-day EMA would temper bearish pressure and could pave the way for stabilization. Failure to reclaim it, alongside an RSI that stays under 50 or drifts toward 40, would maintain downside risk and keep rallies vulnerable to supply. Momentum would improve only if RSI returns above 50 and price establishes acceptance over the average.
(The technical analysis of this story was written with the help of an AI tool.)
Indian Rupee FAQs
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.
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.
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.
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.
