The Indian Rupee has been moving between 88.76 and 89.11 against the US Dollar. The Reserve Bank of India (RBI) is stepping in to keep the currency stable and stop it from exceeding the high of 89.11. If the RBI reduces its market support, we may see more fluctuations in the Indian currency.

Trade Negotiations With The US

US tariffs have made Indian goods less competitive in global markets. The United States has placed a 50% import duty on Indian products due to India’s oil purchases from Russia. Despite this, Commerce and Industry Minister Piyush Goyal is hopeful about ongoing trade negotiations with the US. Foreign buyers have invested Rs. 81.28 crores in the Indian stock market, resulting in small gains. The Indian Rupee performs best against the US Dollar compared to other currencies. The US Dollar Index has recovered some early losses, influenced by political events in Japan and France. The Federal Reserve’s actions are being closely monitored, with the FOMC hinting that a shift to neutral rates could be near. A potential US government shutdown raises concerns about economic stability. The USD/INR is moving sideways between 88.76 and 89.11, with technical signs suggesting a positive trend for now. Currently, the Indian Rupee is in a tight range against the US Dollar, trading between 88.76 and 89.11. This stability is due to the RBI actively selling dollars, which keeps price volatility low. However, we anticipate a significant price change once the RBI pulls back. The main challenge for the Rupee is the 50% US import tariffs, which hurt Indian exports. The RBI’s efforts to support the Rupee are underpinned by strong foreign exchange reserves, which recently climbed back above $620 billion, a level we haven’t seen since early 2024. This strength likely allows the RBI to keep the USD/INR pair below the 89.11 mark for now, but it has also led to lower near-term option prices.

Domestic And Global Economic Pressures

Despite this support, the Rupee faces growing challenges, such as high domestic inflation hovering around 5%, above the RBI’s target of 4%. There is hope for a trade deal with the US before the November deadline, but progress has stalled due to the US government shutdown. This uncertainty suggests the Rupee may weaken further. On the US side, the Dollar Index is strong near a two-month high of 99.00. However, it faces pressure from dovish minutes from the Federal Reserve’s recent meeting. Traders are predicting a 78.6% chance of another rate cut by December, according to the CME FedWatch Tool. Today’s speech by Fed Chair Jerome Powell could significantly impact the Dollar’s future. Foreign investment flows are not providing much support, as the net purchase of Rs. 81.28 crores on Wednesday is small compared to the billions in monthly inflows during the first half of 2025. This indicates that large investors are likely waiting for clearer signals before committing significant funds. The current quiet period feels like it could precede a bigger move. In this compressed environment, it’s wise to prepare for increased volatility. Purchasing long-dated straddles or strangles is a smart way to get ready for a big move outside of the 88.76-89.11 range, regardless of direction. These derivative strategies are currently inexpensive due to low implied volatility but could offer substantial returns once things change. Create your live VT Markets account and start trading now.

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