The Indian Rupee is stable against the US Dollar, around 88.80 as the week begins. The US Senate has approved a bill that ends a nearly 40-day government shutdown and provides funding until January. The US Dollar Index, which shows the value of the Dollar against major currencies, is steady at about 99.65. The passing of the US bill eliminates fiscal uncertainty, and the Indian Rupee remains unaffected by the situation in the US.

Foreign Institutional Investment Insights

In India, Foreign Institutional Investors (FIIs) were active last Friday, buying shares worth Rs. 4,581.34 crore. This influx of foreign investment has strengthened the Indian Rupee against other major currencies. Next, India’s Consumer Price Index (CPI) for October is set to be released, with a predicted growth rate of just 0.48%. Analysts expect this decline due to lower food prices, which may influence the Reserve Bank of India’s monetary policy. The USD/INR exchange rate is around 88.80, above the 20-day EMA of 88.63. The 14-day RSI is important to watch; if it rises above 60.00, it could signal new upward momentum. Support is at 87.07, and resistance is at the high of 89.12. With the government shutdown over, one major source of uncertainty for the US Dollar is removed. We remember a similar situation during the lengthy shutdown from 2018-2019, where the dollar dipped initially before recovering. Currently, the USD/INR pair is steady around 88.80, indicating the market is waiting to see the next steps.

India’s Economic Outlook

A key event in the coming days is India’s inflation data. The forecast for the Consumer Price Index is just 0.48%, which is surprisingly low compared to the 5-7% inflation we experienced in 2023 and early 2024. This sharp drop will significantly influence trading decisions this week. If inflation drops this low, the Reserve Bank of India may consider cutting interest rates again to boost the economy. The RBI already lowered its repo rate by 100 basis points in 2025, to 5.5%. Another cut could weaken the Rupee, causing the USD/INR pair to rise. Derivative traders might want to consider buying USD/INR call options near the all-time high of 89.12. These options could be profitable if the Rupee weakens after the inflation report, while also limiting potential losses. The expected increase in volatility around the data release could make straddle strategies appealing. It’s also important to monitor Foreign Institutional Investors, who unexpectedly became net buyers last week. Their investment power was evident in 2023 when FIIs invested over $21 billion in Indian equities, providing strong support for the Rupee. Continued buying from foreign funds might offset the negative effects of a potential RBI rate cut. From a technical perspective, the pair is trading just below its record high, creating a crucial moment. Traders using futures might consider taking long positions on USD/INR, but they should set tight stop-losses below the 20-day moving average of 88.63. A clear break above the resistance level of 89.12 would indicate a new phase of weakness for the Rupee. Create your live VT Markets account and start trading now.

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