India’s January PMI reports show growth in both services and manufacturing, indicating a healthy economy. However, the Indian Rupee is losing value against the Dollar due to equity outflows and demand for imports. Even with the positive PMI data, the Rupee’s decline continues, driven by factors similar to last year. Commerzbank predicts that the Reserve Bank of India may take steps to stabilize the Rupee.

Forex Market Observations

The FXStreet Insights Team gathered this information from market experts and analysts. An editor reviewed the content to ensure it is accurate and clear. There is a noticeable gap between India’s strong economic signals and its currency performance. The flash Manufacturing PMI for January 2026 is a solid 58.5, but the Rupee keeps falling against the Dollar. This creates a complex situation for derivative traders. The pressures on the Rupee are familiar; we experienced similar challenges throughout 2025. Foreign investors have pulled out over $3 billion last month, significantly impacting the currency. This, combined with steady demand for Dollars from importers, keeps the USD/INR exchange rate near historic highs.

Trading Strategies In Uncertain Markets

Given this trend, traders might consider preparing for further Rupee depreciation in the upcoming weeks. Buying call options on the USD/INR pair can be a way to profit if the currency drops to the 84.00 level. This strategy provides defined risk while also offering potential gains from the ongoing trend. However, it’s important to consider the possibility of intervention from the Reserve Bank of India. The central bank is expected to take action to prevent a chaotic decline, especially with its large forex reserves of over $640 billion. If the bank sells Dollars, it could quickly halt the current rally and lead to a sharp reversal. This mix of strong market dynamics and possible central bank actions is raising implied volatility. For traders anticipating a significant move but uncertain about the direction, a long straddle strategy on USD/INR may be useful. This involves purchasing both a call and a put option at the same strike price, profiting from a major breakout whether the Rupee weakens or strengthens. Create your live VT Markets account and start trading now.

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