The Indian Rupee is currently losing ground against the US Dollar, primarily due to anticipated interest rate cuts by the Reserve Bank of India (RBI) in December. The USD/INR exchange rate has climbed to around 88.85, as speculation about the RBI’s monetary policy puts additional pressure on the Rupee. On Wednesday, the Retail Consumer Price Index data revealed that inflation dropped to 0.25% annually. This decline was driven by lower food prices and cuts to consumer goods taxes. Additionally, Foreign Institutional Investors (FIIs) have been selling off stocks in the Indian market this week, which further impacts the Rupee negatively.

Moody’s Economic Growth Prediction

Moody’s forecasts that the Indian economy will grow by 6.5% through 2027, supported by infrastructure spending, although business capital spending remains uncertain. Investors are looking forward to the release of the Wholesale Price Index data for October, set to come out on Friday. The US Dollar Index, which measures the dollar’s strength, is trading slightly above a 10-day low due to expectations of a Federal Reserve rate cut in December. The likelihood of a rate cut has increased to 67%, amid reports of private employers laying off workers weekly. The USD/INR exchange rate is showing a bullish trend, remaining above the 20-day Exponential Moving Average, with the potential to reach the all-time high near 89.10. Meanwhile, President Trump has signed a bill to reopen the US government after a prolonged shutdown.

Rupee’s Future Outlook

We anticipate that the Rupee will weaken further against the dollar in the coming weeks. The primary factors contributing to this are strong expectations of an RBI rate cut in December and ongoing selling by foreign institutional investors. This situation creates upward pressure on the USD/INR pair. The outflow of capital from foreign investors poses a serious risk to the stability of the Rupee. In November 2025 alone, FIIs have withdrawn over $2.5 billion from Indian equities, confirming the trend of heavy selling we’ve observed this week. This consistent demand for dollars to repatriate funds is weakening the local currency. The case for an RBI rate cut is becoming increasingly compelling, especially with October’s inflation at just 0.25%. It’s worth noting that two years ago, during late 2023, inflation was over 5%. This sharp decline provides the RBI with a strong reason to act. A rate cut of 25 to 50 basis points seems highly likely in the upcoming December meeting. While the Rupee faces significant challenges, the outlook for the US Dollar is less clear. Markets are expecting a Fed rate cut, but officials like Susan Collins are publicly refuting this idea. This divergence in policy—where the RBI seems ready to lower rates while the Fed hesitates—favors a higher USD/INR rate. Given these developments, buying USD/INR call options appears to be a smart move to capitalize on the anticipated rise toward the 89.12 all-time high. Traders willing to take on more risk might consider purchasing USD/INR futures, while importers should quickly look into forward contracts to protect against dollar payments. With volatility likely to stay high, option premiums could be valuable. Create your live VT Markets account and start trading now.

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