The Indian Rupee has fallen against the US Dollar, with the USD/INR rising to around 87.80. In July, India’s Wholesale Price Index inflation fell by 0.58% annually, which was worse than the expected 0.3%, and an increase from 0.13% in June. Weak demand may lead the Reserve Bank of India to lower interest rates even more. Caution is in the air due to upcoming talks between US President Donald Trump and Russian leader Vladimir Putin, which could affect global trade and tariffs related to India.

Meeting Is Critical For Trade Relations

This meeting is crucial because the US has raised tariffs on India’s imports due to India’s oil purchases from Russia. US Treasury Secretary Bessent has warned that tariffs may increase if the diplomatic talks do not go well. Despite these trade issues, S&P continues to support India’s sovereign ratings, citing low trade dependency and strong domestic consumption. Indian equity markets are experiencing continuous foreign fund outflows, with foreign institutional investors selling large stakes recently. The Indian Rupee remains weak as domestic equity markets will close for Independence Day. The USD/INR trends upwards, with significant support at the 20-day EMA. Financial participants are eyeing the upcoming US Producer Price Index data, which could hint at inflation trends. Current economic conditions have sparked speculation about the Federal Reserve’s interest rate decisions.

Indian Rupee Faces Near Term Pressure

In the short term, the Indian Rupee is likely to face more pressure against the US Dollar. With the USD/INR pair near 87.80, a level not seen consistently since early 2024, further depreciation seems probable. This situation suggests that buying USD/INR futures or call options could be a wise move. The ongoing wholesale price deflation at -0.58% suggests a slowdown in economic demand in India. This raises the chances that the Reserve Bank of India will reduce interest rates in its next meeting to encourage growth. Previously, the RBI cut rates by 25 basis points in June 2025, and this declining trend may support further cuts. The upcoming meeting between the US and Russian presidents adds to the uncertainty. If negotiations fail, higher US tariffs on Indian goods could follow, directly impacting trade and further weakening the rupee. We suggest that buying straddles or strangles on the USD/INR pair could be a good strategy to trade the expected price swings around this event. We are also monitoring the ongoing outflow of foreign funds from Indian equity markets, which significantly contributes to the rupee’s decline. Recent data shows foreign institutional investors have sold nearly $4 billion in equities since mid-July 2025, a trend that usually leads to a weaker currency. Traders may want to consider purchasing put options on Nifty or Bank Nifty to hedge against a potential market dip. From a technical standpoint, the USD/INR pair is in a strong uptrend, staying well above its 20-day exponential moving average, which serves as a dynamic support level. Attention is now on the upcoming US Producer Price Index data, as a higher-than-expected figure could prompt the Federal Reserve to adopt a more aggressive approach. A strong US Dollar would further support the USD/INR rally. Create your live VT Markets account and start trading now.

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