USD/INR rises even as RBI keeps Repo Rate steady at 5.25%

The Indian Rupee (INR) trades lower against the US Dollar (USD) during afternoon trading hours in India on Friday. The USD/INR pair rises to near 90.60, even as the Reserve Bank of India’s (RBI) monetary policy announcement has held the Repo Rate unchanged at 5.25%, as expected.

The RBI was expected to maintain the status quo as it reduced the Repo Rate by 125 basis points (bps) in 2025 as price pressures have rebounded in the past few months and the announcement of trade deals with the United States (US) and the European Union (EU) has lifted growth prospects. The Indian central bank has maintained a “neutral” stance on the monetary policy outlook, citing that India’s economy is in a “good spot” even as global uncertainties remain “elevated”.

Broadly, the Indian Rupee has been outperforming across the board since the confirmation from India and the United States (US) that both will reduce tariffs. On Monday, US President Donald Trump said through a post on Truth Social that tariffs on imports from New Delhi will be lowered to 18%, from 50% prior, and there will be zero tariff charged on exports from Washington to India, which was later acknowledged by Indian Prime Minister (PM) Narendra Modi.

The event led to a sharp increase in the Indian Rupee, strong demand for Indian stocks, and a significant inflow of foreign funds into the Indian equity market. However, the lack of follow-up buying by Foreign Institutional Investors (FIIs) is weighing on market sentiment.

According to data from the National Stock Exchange (NSE), FIIs turned out to be net sellers on Thursday, offloading their stake worth Rs. 2,150.51 crore. On Tuesday, a day after the US-India trade truce, FIIs bought shares worth Rs. 5,236.28 crore.

Daily Digest Market Movers: Dovish Fed expectations restricts US Dollar's rally

• The US Dollar struggles to extend its week-long rally on Friday as prospects of the Federal Reserve (Fed) reducing interest rates have improved, following a string of weak labor market data.
• At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% lower to near 97.85. Still, the DXY is close to its weekly high of 97.98 posted on Thursday.
• The CME FedWatch tool shows that traders see a 22.7% chance that the Fed will cut interest rates by 25 basis points (bps) to 3.25%-3.50% in the March policy meeting, up from 9.4% seen on Wednesday.
• The US JOLTS Job Openings data for December showed on Thursday that employers posted 6.542 million fresh jobs, significantly lower than estimates of 7.2 million and the previous reading of 6.928 million.
• On Wednesday, the ADP reported that the private sector created 22K jobs in January, fewer than 37K in December.
• A majority of Federal Open Market Committee (FOMC) members have been expressing concerns over weak labor market conditions, citing the need for more interest rate cuts to support the same.
• For more cues on the current state of employment, investors will focus on the Nonfarm Payrolls (NFP) data for January, which will be released on Wednesday. The data has been delayed due to a partial federal shutdown, which resumed on Tuesday.

Technical Analysis: USD/INR sees more downside towards 89.50

In the daily chart, USD/INR trades at 90.3790. Price holds beneath the 20-EMA at 90.9282, which slopes lower and caps rebounds. This alignment keeps the short-term bias tilted to the downside. RSI at 42 (neutral) sits below its 50 midline, confirming fading momentum. As long as spot remains under the 20-EMA, rallies could stall and the pair would continue to test lower levels.

Trend signals remain soft, with the 20-EMA turning down in recent sessions and reinforcing persistent supply. RSI continues to slip, now at 42 (neutral), without reaching oversold. A recovery through the 20-EMA at 90.9282 would improve tone and open room for stabilization, while failure to reclaim it would preserve downside risk.

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