USD/INR falls at open on RBI’s intervention following India’s budget release
- The Indian Rupee rises against the US Dollar at the open after the RBI’s intervention.
- The Indian equity market fell sharply on Sunday after the government announced the FY 2026-27 fiscal budget.
- Warsh’s selection as the Fed’s new Chairman has strengthened the US Dollar.
The Indian Rupee (INR) gains against the US Dollar (USD) in the opening session on Monday, following the fiscal budget Financial Year (FY) 2026-27 announcement by the Indian government on Sunday. The USD/INR pair declines to near 91.85 as the Reserve Bank of India (RBI) has intervened in the spot and Non-Deliverable Forward (NDF) markets to provide a cushion to the Indian Rupee near its lifetime lows against the US Dollar.
According to a report from Reuters, traders say that the Indian central bank likely intervened before the local spot market opened on Monday to help the currency stave off a fall to near record low levels.
Meanwhile, Indian stock markets trade slightly higher after a subdued opening on Monday, striving to regain ground after crashing the previous day. Indian bourses fell like a house of cards on Sunday after the annual budget announcement in which the government surprisingly raised Securities Transaction Tax (STT) on trading in the Futures and Options (F&O) segment in the derivative market to extend its grip on curbing speculative activities.
Other major highlights of the fiscal budget were 22% increase in the defence budget to modernize defence equipment, 9% rise in capital expenditure to ₹12.2 lakh crore, tax holidays for global companies to produce data centers in India till 2047, an increase in outlay of Rs. 40,000 Crore to boost the manufacturing of electronic components, and the launch of the Semiconductor Mission 2.0.
Going forward, the major trigger for the Indian Rupee will be the monetary policy announcement by the RBI on Friday. In the December policy meeting, the Indian central bank slashed the Repo Rate by 25 basis points (bps) to 5.25%, and announced a fresh liquidity infusion of ₹1.5 lakh crore to boost credit flow.
Daily Digest Market Movers: US Dollar gains on Warsh’s nomination as Fed Powell’s successor
- RBI’s surprise intervention has supported the Indian Rupee to counter the firm US Dollar. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto Friday’s gains near 97.33.
- The US Dollar gained sharply on Friday after the White House nominated former Federal Reserve (Fed) Governor Kevin Warsh as the successor of current Chairman Jerome Powell. Investors took Warsh’s appointment as favorable for the US Dollar, given his historical preference for a strong US Dollar in his prior term at the Fed.
- While investors think Warsh will be inclined to cut rates as United States (US) President Donald Trump already said that the *new Chairman will support bigger cuts, they expect him to rein in the Fed’s balance sheet, which is typically supportive for the dollar as it reduces the money supply in the market, Reuters reported.
- A higher US Dollar has resulted in a sharp decline in the appeal of precious metals, which had rallied significantly in recent months on expectations that Trump’s new candidate will dampen the Fed’s autonomous character.
- For near-term cues on the Fed’s monetary policy outlook, investors await a slew of employment-related economic data, especially the Nonfarm Payrolls (NFP) report for January, which will be released on Friday.
- In Monday’s session, investors will focus on the ISM Manufacturing Purchasing Managers’ Index (PMI) data for January, which will be published at 15:00 GMT. Economists expect the manufacturing sector activity to have contracted again, but at a moderate pace. A figure below 50.0 is considered a contraction in the business activity. The ISM Manufacturing PMI is seen higher at 48.3 from 47.9 in December.
Technical Analysis: USD/INR corrects to near 91.85
USD/INR trades lower at around 91.8550 at the time of writing. The pair holds firm above the rising 20-day EMA at 91.2697, keeping the short-term uptrend intact. The average continues to ascend, pointing to sustained buying pressure and favoring dips to be bought.
RSI at 65 (positive) has cooled from recent overbought readings, yet remains above the midline to validate bullish momentum. Continuation could see the advance extend, while pullbacks would find initial support at the rising average. A daily close beneath it would open room for a deeper correction.
(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.
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