USD/INR rose on Wednesday after small losses the day before. Gains were capped because equity inflows supported the Rupee. At the same time, steady US Dollar demand from Indian companies limited Rupee strength.
Provisional Reuters data showed foreign investors bought Indian equities worth 694.5 million rupees ($7.67 million) on Tuesday, marking the third straight day of inflows. Markets also watched December-quarter earnings as the season neared its end.
Rupee Support And Importer Demand
The Rupee found support near 90.70–90.80 on Tuesday. Importers kept hedging, and their buying picked up whenever the Rupee strengthened.
Domestic liquidity remained ample after Reserve Bank of India injections pushed the overnight borrowing rate almost 100 basis points below the policy rate. The liquidity surplus was about INR 3 trillion, the biggest in six months. It was supported by government spending and fund inflows.
The US Dollar Index fell for a fourth session and traded near 96.60. Markets were waiting for the US Nonfarm Payrolls report, expected to show 70,000 jobs added in January, with the unemployment rate seen at 4.4%.
US Retail Sales were unchanged at $735 billion in December after a 0.6% rise in November, compared with a 0.4% forecast. Sales rose 2.4% year on year. October–December 2025 sales rose 3.0% (±0.4%).
Post Payrolls Dollar Repricing
The US jobs report has now been released, and it has changed the outlook. January Nonfarm Payrolls were much stronger than expected. Instead of 70,000 jobs, the economy added 185,000. As a result, the US Dollar Index (DXY) jumped from about 96.60 to around 97.40, reversing the recent slide.
This stronger labor data makes December’s flat retail sales look like a pause, not the start of a downtrend. For USD/INR, it shifts the balance higher. We expect the pair to break the nearest resistance at the nine-day EMA near 90.83 in the coming sessions.
The main near-term trade is to position for a stronger US Dollar. We see buying short-dated USD call options with strikes around 91.00 and 91.50 as the most direct approach. This gives exposure to a possible move toward the top of the descending channel near 91.60.
In India, equity inflows offer some support, but they may be small compared with renewed dollar strength. The large liquidity surplus of about INR 3 trillion, which has kept local rates low, could also weigh on the Rupee. We are also monitoring India’s January inflation reading. At 5.5%, it remains well above the RBI’s 4% target and could push the central bank to respond.
With this backdrop, the key support at the 50-day EMA near 90.50 looks less likely to be tested. Traders who are bearish on the Rupee can look for a sustained move above 90.83 as confirmation. The recent record high of 92.51, set last month in January, shows how quickly USD/INR can move when dollar momentum builds.
For traders looking to hedge or play a reversal, the descending channel remains in place on the charts. Buying USD put options with strikes below 90.50 is a sensible way to position for a scenario where the US data proves to be a one-off and the pair drops back into its range. For now, however, the path of least resistance for USD/INR still appears higher.
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