USD/INR edges down on likely FIIs return to Indian markets
- The Indian Rupee edges up to near 91.10 against the US Dollar at open on massive FIIs buying on Monday.
- US-Iran nuclear talks and India’s Q4 GDP data to be key triggers for the Indian Rupee.
- US President Trump threatens higher duties on countries if they don’t honor trade deals.
The Indian Rupee (INR) ticks up against the US Dollar (USD) in the opening trade on Tuesday. The USD/INR pair edges down to near 91.10 on the expectation that the Reserve Bank of India (RBI) has intervened in spot and forward markets to support the Indian Rupee.
The Indian central bank is likely selling US dollars on Tuesday to prevent the rupee from falling past the psychologically important 91-per-dollar mark, Reuters reported.
In addition to RBI’s likely intervention, a strong inflow of foreign funds into the Indian stock market on Monday has also supported the Indian Rupee. On Monday, Foreign Institutional Investors (FIIs) bought shares worth Rs. 3,483.70 crores, the second-highest amount of buying this month, and turned the entire month net positive in terms of foreign flows. So far in February, FIIs have purchased shares worth Rs. 1,472.46 crore.
This week, major triggers for the Indian Rupee will be nuclear talks between the United States (US) and Iran on Thursday, and India’s Q4 Gross Domestic Product (GDP) data on Friday.
The outcome of US-Iran nuclear talks will have a significant impact on the oil price. Currencies of countries that lack oil reserves and rely heavily on their imports to cover their energy needs remain highly sensitive to changes in the oil price.
Ahead of US-Iran talks, President Donald Trump has threatened Tehran through a post on Truth Social that it will be a very bad day for the country and its people if they don’t reach a deal.
Meanwhile, the US Dollar (USD) extends its recovery move on the expectation that volatility sparked by the US Supreme Court’s (SC) verdict against President Donald Trump’s tariff policy won’t last long. During the press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.2% higher to near 97.90.
Financial market participants believe that President Donald Trump has several alternatives to keep tariffs intact and has also threatened countries against “playing games with existing trade agreements” after the court’s verdict.
On Friday, the US Supreme Court ruled that Trump exceeded his authority by invoking economic emergency powers to back his tariff agenda and blocked additional import duties. In response, Trump has already announced 15% global tariffs.
Technical Analysis: USD/INR holds key 20-day EMA
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USD/INR trades marginally lower at open around 91.10. Price holds above the 20-day Exponential Moving Average at 90.9273, keeping a mild bullish bias.
The 20-day EMA has flattened through recent sessions and is starting to turn higher, suggesting buyers retain control while above this gauge and could extend the advance toward the January 23 low of 91.61. While a pullback below the average could shift bthe ias back into a range.
The 14-day Relative Strength Index (RSI) continues to wobble inside the 40.00-60.00 range, indicating a sideways trend.
(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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