USD/INR opens flat ahead of FOMC Minutes
- The Indian Rupee trades flat at open around 90.80 against the US Dollar ahead of the release of the FOMC Minutes.
- Fed’s Barr wants more evidence on inflation returning to the 2% target before supporting further rate cuts.
- FIIs' investment in the Indian equity market appears to be modest despite the US-India trade deal confirmation.
The Indian Rupee (INR) opens almost flat against the US Dollar (USD) on Wednesday. The USD/INR pair is expected to wobble near its current levels at around 90.80 as investors await the release of Federal Open Market Committee (FOMC) Minutes at 19:00 GMT.
At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% higher to near 97.20.
Investors will pay close attention to the fine print of the January policy meeting to get fresh cues on the Federal Reserve’s (Fed) monetary policy outlook. At the policy meeting, the Fed announced a pause in the monetary easing cycle by leaving interest rates unchanged at 3.50%-3.75% after three consecutive rate cuts and indicated that upcoming policy decisions will be data-dependent.
Currently, the CME FedWatch tool shows that the Fed is unlikely to cut interest rates in the March and April policy meetings.
Meanwhile, Fed officials have stressed further progress in inflation before unwinding monetary policy restrictiveness. “I would like to see evidence that goods price inflation is sustainably retreating before considering reducing the policy rate further, provided labor market conditions remain stable,” Fed Governor Michael Barr said in a speech on Tuesday, Reuters reported.
This week, investors will also focus on preliminary United States (US) Q4 Gross Domestic Product (GDP) data, scheduled for release 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.
In India, foreign investors' sentiment toward the Indian stock market remains lackluster despite confirmation of a trade deal with the US. The level of investment by Foreign Institutional Investors (FIIs) appears to be significantly lower than the volume of selling observed in January. On Tuesday, FIIs bought shares worth Rs. 995.21 crore. So far in February, overseas investors have remained net sellers, paring their stake by Rs. 1,350.48 crore.
Going forward, the Indian Rupee will be influenced by the preliminary HSBC Purchasing Managers’ Index (PMI) data for February, which will be released on Friday.
Technical Analysis: USD/INR trades close to 20-day EMA
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USD/INR trades calmly at around 90.80 as of writing. Price holds just below the 20-day Exponential Moving Average (EMA) at 90.8633, which caps the rebound and keeps the near-term tone muted. The 20-day EMA has flattened after an earlier advance, signaling waning upside momentum.
The 14-day Relative Strength Index (RSI) at 49.55 (neutral) edges higher from recent readings, indicating stabilization without a decisive bullish shift.
A daily close by the pair above the 20-day EMA at 90.8633 would improve recovery prospects and advance it towards the January 28 low of 91.66. Failure to clear that barrier would maintain a sideways-to-soft bias.
(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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