The Indian Rupee (INR) fell against the US Dollar (USD) on Thursday, nearing 90.30. This happened even after the Reserve Bank of India (RBI) sold US Dollars heavily on Wednesday to stabilize the market. Indian importers took advantage of the fluctuations caused by rising trade tensions between the US and India, especially after New Delhi’s import tariffs on oil from Russia went up to 50%. These ongoing trade tensions have made investors wary of the Indian stock market. Consequently, Foreign Institutional Investors (FIIs) have been net sellers for most of 2025, offloading shares worth Rs. 4,650.39 crore just this January. Although the US released strong ISM Services PMI data, both the ADP Employment Change and JOLTS Job Openings came in below expectations, leading to speculation about possible interest rate cuts by the Federal Reserve.

USD/INR Technical Analysis

The USD/INR pair rose towards 90.35, approaching key technical indicators like the 20-day Exponential Moving Average (EMA) at 90.2025. The US labor market, reflected in Nonfarm Payrolls data, shows volatility. For the December report, projections suggest a drop in job additions to 60K and an expected slight decrease in the unemployment rate to 4.5%. This data is vital as it impacts Federal Reserve policy and currency fluctuations. Our immediate focus is the upcoming US Nonfarm Payrolls report this Friday. The strong services PMI data from December 2025 conflicts with the weaker ADP and JOLTS job figures, creating uncertainty. Conflicting data like this often leads to significant market volatility, and we should brace for a sharp move in the US Dollar. Given the payrolls report on the horizon, we are considering options strategies that gain from volatility spikes instead of simply betting on price direction. We may look into long straddles or strangles on the USD/INR pair to facilitate a potential breakout, regardless of the direction. Implied volatility on one-week options has already risen to 9.5%, indicating market expectations for a substantial price shift after the announcement.

Market Sentiment and Future Direction

Looking beyond this week’s data, the outlook suggests a weaker Rupee in the medium term. FIIs have withdrawn over Rs. 95,000 crore from Indian equities in 2025, highlighting a fundamental lack of confidence that the RBI’s efforts alone cannot resolve. We view any temporary strength in the Rupee as a chance to strengthen long USD/INR positions. Importers should consider using current rates to hedge their dollar payables for the upcoming months, as the USD/INR trend appears to be upward. If the rate goes above 90.35, it could push towards the all-time high of 91.55, especially if trade tensions from Washington escalate. Recent banking data shows that importer hedging ratios have already risen to 70% for short-term payables, reflecting widespread concern about further Rupee depreciation. Create your live VT Markets account and start trading now.

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