The Indian Rupee is holding steady at 88.90 against the US Dollar. This is just a bit below its previous high of 89.12. Ongoing trade issues between the US and India are contributing to this situation. A recent 50% tariff on Indian exports to the US, tied to India’s oil purchases from Russia, has intensified these tensions. Trade negotiations between both countries have stalled, as noted by Minister Jaishankar, who emphasized the absence of agreement without specific details. Historical demands from the US for India to open its agriculture and defense markets have hindered progress.

Impact On Stock Market

The trade tensions have negatively impacted the Indian stock market. Foreign Institutional Investors (FIIs) sold Rs. 1,29,870.96 crores from July to September. In September, the HSBC Services PMI dropped to 60.9 from 62.9 in August. Despite risks of a government shutdown in Washington, the US Dollar is up 0.35%. Speculation about potential Federal Reserve rate cuts is growing, with an 84% chance expected for a 25-basis point cut in upcoming meetings. In currency markets, the USD/INR is on the rise, supported by a 20-day EMA above 88.60 and an RSI above 60.00. If it breaks through 89.12, the pair could reach 90.00. Tariffs are an important part of US trade policy and act as protectionist measures, different from individual taxes. The USD/INR pair is showing a strong upward trend, making long positions appealing in the coming weeks. A break above the recent all-time high of 89.12 seems likely. The ongoing trade friction between the US and India is the main factor behind this. With clear upward momentum and the psychological target of 90.00, buying USD/INR call options is a smart move. Consider options with strike prices around 89.50 or even 90.00 for November expiration to seize the expected increase. This strategy lets us benefit from the rise while limiting our risk to the premium paid.

Capital Flight And RBI Intervention

The selling by Foreign Institutional Investors suggests negativity toward Indian assets. After a sell-off of nearly Rs. 1.3 lakh crore last quarter, early data from the National Securities Depository Limited (NSDL) shows an additional outflow of Rs. 4,500 crores in the first week of October 2025. This capital flight puts continuous pressure on the rupee. We should keep an eye on the Reserve Bank of India (RBI) for intervention; they might try to stabilize the rupee. Recent data shows the RBI sold dollars, leading to a $2.5 billion drop in foreign exchange reserves for the week ending October 3rd. While this may provide short-term relief, it’s unlikely to alter the ongoing trend caused by trade issues. Interestingly, the US government shutdown is boosting the dollar as a safe-haven currency, keeping the DXY strong near 98.00. New estimates from the Congressional Budget Office indicate a 0.2% impact on Q4 GDP for every week the shutdown persists. This economic risk raises expectations for Fed rate cuts, but currently, global uncertainty is benefiting the dollar. This scenario resembles 2022-2023 when global rate hikes pushed the rupee past 83 against the dollar. However, the trade-related challenges now feel more direct and ongoing. Technical indicators, especially the RSI above 60, suggest we should maintain a bullish approach. We should consider any minor dips, perhaps towards the 88.60 level, as chances to strengthen long positions. Create your live VT Markets account and start trading now.

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