The Indian Rupee is holding steady against other currencies, despite ongoing pressure from rising oil prices. Economies that rely on oil are facing challenges due to a 6% increase in global oil prices since Thursday. This spike, driven by unrest in Iran, puts 1.9 million barrels per day of exports at risk. In January, Foreign Institutional Investors sold Rs. 11,786.82 crore worth of Indian stocks, adding to the pressure on the Rupee amid US-India trade tensions. However, US-India trade talks scheduled for Tuesday may bring positive news that could help the Indian stock market.

Upcoming CPI Release

India’s Consumer Price Index for December is expected to show a year-on-year growth of 1.5%. The USD/INR exchange rate is slightly down at around 90.40, as the US Dollar weakens due to legal issues involving Jerome Powell. The US Dollar Index is also down, sitting at 99.10, following legal proceedings related to his testimony. US inflation data, set to be released on Tuesday, is likely to show an increase in core inflation to 2.7% year-on-year. The recent US jobs report revealed better-than-expected outcomes: a lower Unemployment Rate of 4.4% and improved wage growth at 3.8%, enhancing the attractiveness of the US Dollar. While USD/INR is slightly lower, it remains above its 20-Exponential Moving Average, which supports a positive short-term outlook. As we start the week, it’s worth reflecting on where we stood last year. In January 2025, the Rupee faced significant pressure, trading near 90.40 against the dollar due to soaring oil prices and heavy selling by foreign investors. This comparison highlights the current market’s calmness. Last year, global oil prices rose nearly 6% amid fears of supply disruptions from Iran, significantly affecting the Rupee. Today, in January 2026, the situation has improved considerably, with Brent crude prices stabilizing around $78 per barrel, easing immediate inflation concerns that were prevalent in early 2025.

Foreign Fund Flows and Market Outlook

Another noteworthy change is in foreign fund flows. Foreign Institutional Investors withdrew nearly ₹11,800 crore in the first half of January 2025, but this trend has completely reversed. Foreign Portfolio Investors (FPIs) were strong net buyers in December 2025, investing over ₹55,000 crore in Indian equities, signalling renewed market confidence. On the US front, circumstances have changed as well. A year ago, the US Dollar Index was strong above 99.00, boosted by solid wage growth of 3.8% and rising inflation expectations. Now, recent US CPI data indicates that core inflation has cooled to 3.2%, shifting the focus from potential rate hikes to the possibility of rate cuts later this year, which alters the outlook for the dollar. Considering these changes, the trading strategy for USD/INR should shift from the bullish approach observed in early 2025. With oil prices stable and significant FPI inflows supporting the Rupee, any increases in the USD/INR pair are likely to be met with selling. We should look to sell on strength rather than buy on dips, as last year’s upward momentum has faded. The political events of last year, such as the criminal charges against Fed Chair Powell, remind us of how non-economic factors can cause volatility. Although that situation has passed, we should consider using options to guard against unexpected political or policy announcements. The current lower volatility environment may provide a good chance to buy protection or set up trades that benefit from sudden price movements. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now