The Indian Rupee (INR) has reached a new low against the US Dollar (USD), with the USD/INR exchange rate approaching 90.00. In the last five months, Foreign Institutional Investors have pulled out ₹1,49,718.16 crore from the Indian market. India’s economy grew by 8.2% in the third quarter, which was higher than anticipated. This growth rate is the fastest we’ve seen in over six quarters. However, there’s uncertainty about whether the Reserve Bank of India (RBI) will cut rates in its upcoming policy announcement.

Federal Reserve Rate Expectations

The Federal Reserve is likely to cut interest rates next week, with an 87.4% chance of a 25-basis point reduction. The US Dollar Index is close to a two-week low of 99.40. The market outlook for the USD could worsen due to possible changes in Fed leadership. Technically, the USD/INR has hit a record level near 90.00, with upward momentum shown by the 20-day EMA at 89.0823 and an RSI near overbought at 68.85. If it breaks above 90.00, the pair could rise towards 91.00, while support may appear around 89.14. With the Indian Rupee hitting a low near 90.00 against the US Dollar, we see huge pressure from foreign withdrawals. Data from the National Securities Depository Limited (NSDL) shows that foreign institutional investors have taken out over ₹1.49 trillion from Indian equities since July 2025. This outflow overshadows the positive news of the strong 8.2% GDP growth in Q3. Currently, international sentiment seems to impact the currency more than the domestic economy. The upcoming RBI interest rate decision this Friday adds to the uncertainty, creating a high-volatility environment. Since opinions are divided on whether the RBI will lower rates or keep them steady, derivative traders might consider strategies that profit from significant price swings in either direction. A long straddle, which involves buying near-term USD/INR call and put options, could be a smart way to prepare for potential sharp movements following the announcement.

Traders Hedging Strategies

On another note, the US Federal Reserve is expected to cut interest rates next week, with an 87.4% probability of this happening on December 10th. A rate cut usually weakens a currency, meaning the dollar’s recent strength might soon reverse. This creates a conflicting signal, as the primary reasons for the USD/INR rally could soon diminish. The ongoing weakness of the Rupee alongside the expected weakness of the Dollar highlights the need for hedging. Traders with long positions in the USD/INR pair should consider buying put options to guard against a possible drop below 89.14. This strategy creates a safety net for their positions, protecting profits in case the Fed’s dovish stance affects the dollar or if the RBI surprises with a hawkish announcement. Historically, significant round numbers like 90.00 serve as psychological barriers, and breaking through them can lead to further momentum. We observed similar behavior back in 2022 when the Rupee first crossed the 80.00 mark, leading to rapid follow-up changes. Thus, we expect to see increased interest in call options with strike prices at 90.50 and 91.00 as traders prepare for a potential rise into uncharted territory. Create your live VT Markets account and start trading now.

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