The Indian Rupee (INR) has dropped for the fourth consecutive trading day against the US Dollar (USD). The USD/INR pair is nearing its record high of 91.55, despite some pressure on the Dollar due to disputes between the US and Eurozone over Greenland. A strong demand for the US Dollar from Indian importers is pushing the USD/INR pair higher. This demand continues because there is still no trade agreement between the US and India, even though negotiators have been optimistic for over six months.

Impact on Foreign Interest in the Stock Market

The ongoing trade issues between the US and India are affecting foreign interest in the Indian stock market. Foreign Institutional Investors (FIIs) have sold shares worth Rs. 29,315.22 crore in January, marking six months of consistent outflow. Currently, the USD/INR is trading at 91.2570. The 20-Day Exponential Moving Average (EMA) is below at 90.4727, indicating support. The 14-day Relative Strength Index (RSI) is at 67.67, showing strong upward momentum. Additionally, the US Dollar has strengthened against the Rupee amidst tensions between the US and EU over Greenland. New tariffs announced by President Trump are putting pressure on US assets, disturbing market dynamics. Traders expect the Federal Reserve to maintain interest rates, even though discussions about job risks have arisen. Given the weak Indian Rupee, the USD/INR is likely to keep rising in the near future. The pair is approaching its all-time high of 91.55, and current momentum suggests traders should focus on strategies that benefit from a rising dollar against the rupee. With the spot price at 91.2570, there isn’t much room left before a key psychological level is reached.

Technical Analysis and Trading Strategy

The technical setup supports a bullish outlook, as the price is well above the 20-day EMA of 90.47, which now acts as a crucial support level for any pullbacks. The RSI is nearing overbought territory at 67.67, indicating strong upward movement. Therefore, any dips toward the 90.47 support level could present good buying opportunities. In the upcoming weeks, buying USD/INR call options with strike prices at or above 91.50 seems wise to capitalize on further upside. Traders with long futures positions should consider using the 20-EMA as a trailing stop-loss to safeguard profits. Given the steady trend, shorting the pair carries high risk until we see a clear sign of a reversal. The Rupee’s pressure is driven by ongoing selling from Foreign Institutional Investors. Data from the National Securities Depository Limited shows that this heavy outflow has exceeded ₹29,300 crore just this month. This consistent trend of foreign capital exiting Indian equities has been a challenge for the Rupee since mid-2025. Moreover, strong demand for US Dollars from Indian importers is weighing on the Rupee, and the stalled US-India trade talks are exacerbating the situation. Recently, reports indicated that dollar purchases by oil marketing companies increased by over 10% in the last quarter of 2025, pointing to inelastic demand. The absence of a trade deal after more than six months of discussions prevents a recovery in foreign investor confidence. In terms of volatility, implied volatility for USD/INR options has reached a six-month high. This suggests the market is anticipating larger price swings, making long volatility strategies like straddles potentially profitable around key data releases or central bank meetings. However, high premiums also make selling uncovered options particularly risky. Historically, a similar situation occurred in the third quarter of 2024 when a prolonged FII sell-off caused the RSI to exceed 70 before the pair consolidated for a few weeks. Although the current momentum is strong, we should be ready for a possible pause or brief pullback if the RSI moves firmly into overbought territory above 70. This indicates that while the trend is upward, the rally may experience fluctuations. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now