The Indian Rupee has increased in value against the US Dollar, bringing the USD/INR rate close to 88.00. This change is happening amidst threats of US import tariffs. Indian currency markets are closed for holidays on Tuesday and Wednesday. The USD/INR dipped to around 87.90, even though US President Trump warned that tariffs on Indian imports will stay in place until India stops buying oil from Russia. The Indian government has denied Trump’s claim about halting oil imports from Russia.

Trade Tensions and Tariff Effects

India’s purchase of Russian oil has raised tensions in trade with the US. As a result, tariffs on Indian imports have increased to 50%, which has weakened the Indian Rupee and led to foreign investment leaving the stock market. This month, Foreign Institutional Investors (FIIs) have reduced their stock sales in India to Rs. 586.76 crores in October. However, this amount is lower than previous quarter sales. US-China trade tensions have eased after President Trump said that imposing 100% tariffs on Chinese goods is not feasible. A meeting between Trump and Xi Jinping is expected to yield positive outcomes for both countries. Technical analysis indicates that the USD/INR is facing challenges at the 50-day EMA support level, with the relative strength index falling. A key support level is at 87.07, while resistance is found at the 20-day EMA.

Rupee Strength and Market Outlook

The Rupee’s recent gain, pushing USD/INR toward 88.00, creates an intriguing situation for the upcoming weeks. With Indian markets closing for Diwali, we expect lower trading volume, which could heighten market reactions to international news. Traders should be careful of potential price shifts when trading resumes later this week. The ongoing uncertainty regarding tariffs on India’s Russian oil imports is a major concern. Although Trump’s threats could push USD/INR higher, they are balanced by the slowdown in foreign investment outflows. Recent data from the National Securities Depository Limited (NSDL) indicates that FIIs were net neutral in early October 2025, a significant change from the heavy selling seen in the third quarter. A weaker US Dollar Index, currently around 98.45, adds downward pressure on the USD/INR pair. This dollar weakness is driven by market expectations of an aggressive Federal Reserve, with nearly a 70% chance of a 50 basis point rate cut by the end of the year, according to the CME FedWatch tool. In previous easing cycles, such as in 2019, this has often helped emerging market currencies against the dollar. The upcoming meeting between US and Chinese officials is crucial to monitor this week. Positive trade developments, especially concerning rare earth minerals, could boost global market confidence and support the Rupee. A favorable outcome might bring USD/INR close to its August 2025 low of 87.07. From a technical perspective, the inability of USD/INR to break above the 50-day EMA at 88.13 shows continued selling pressure. Writing call options with strike prices above 88.25 could be a beneficial strategy to earn premiums while the currency pair stabilizes. The low RSI reading below 40 suggests that momentum is in the hands of sellers. With conflicting signals from US tariff threats and a dovish Fed, we anticipate that implied volatility in USD/INR options will stay high. Traders already holding currency positions might consider buying puts to protect against a sharp downturn caused by positive US-China news or a weaker dollar. This approach allows for the chance to benefit from further Rupee strength while managing risk. Create your live VT Markets account and start trading now.

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