The Indian Rupee opened flat on Tuesday, near Monday’s low of about 90.80 per US Dollar. USD/INR stayed mostly steady. Importer demand supported the pair, but worries about possible Reserve Bank of India (RBI) intervention capped gains.
Foreign Institutional Investors (FIIs) were net sellers in February, cutting holdings by Rs. 2,345.69 crore. On Monday alone, FIIs sold shares worth Rs. 972.13 crore.
Markets looked ahead to a second round of US-Iran talks in Geneva. Oil prices were in focus, especially if the talks fail. Because India imports most of its oil, higher energy costs could weaken the Rupee.
The US Dollar traded in a narrow range after a long US weekend. This kept USD/INR range-bound as well. The US Dollar Index was flat near 97.15.
Focus also shifted to Federal Reserve rate expectations. CME FedWatch showed no rate cut priced in for March or April. US inflation cooled in January, with headline inflation at 2.4% year on year and core inflation at 2.5%.
Key US releases this week include the January FOMC minutes and the first estimate of Q4 GDP. In January, the Fed held rates at 3.50%–3.75% and signaled it needs clearer progress before cutting further.
USD/INR traded near 90.9035, slightly above the 20-day EMA at 90.8822. The 14-day RSI was 51.19. Key levels: 90.00 on the downside and 91.25 on the upside.
USD/INR is showing a familiar sideways pattern, similar to the consolidation seen around this time last year. The pair is stuck between steady dollar demand from importers and the market’s memory of past RBI intervention. As a result, the trading range is tight, and near-term directional trades carry more risk.
Looking back, the weak foreign investor sentiment seen in early 2025 became a full-year trend. FIIs pulled nearly ₹1.8 lakh crore out of Indian equities in 2025. In 2026 so far, there has been a small net inflow of about ₹12,000 crore. Still, traders should stay cautious because this recovery remains fragile. A return to heavy outflows could quickly weaken the rupee.
Oil remains a key risk for the rupee. After last year’s US-Iran talks failed to produce a lasting deal, Brent crude stayed high and averaged about $94 per barrel in Q4 2025. Geopolitical tensions need close monitoring, because any jump in energy prices would likely add direct pressure on the rupee.
One major change from early 2025 is the outlook for US monetary policy. Last year, markets expected the Fed to stay on hold. Now, expectations point to at least two rate cuts in 2026, with the first possibly in June. This more dovish outlook could limit overall dollar strength and offer some support to the rupee.
It is also important to remember that the RBI defended the 92.00 level aggressively through mid-2025, using foreign exchange reserves to limit volatility. Reserves are currently strong at about $640 billion. This gives the RBI room to intervene again if the rupee weakens too quickly. That makes shorting the rupee risky beyond key psychological levels.
With these forces offsetting each other, derivatives traders may prefer strategies that benefit from range-bound trading and low volatility. Selling out-of-the-money strangles on USD/INR could fit this setup over the next few weeks. The strategy works best if the pair stays inside a clear, stable channel.
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