USD vs INR: Following the Reserve Bank of India (RBI) aggressive US Dollar (USD) selling, the Indian National Rupee (INR) roared back strongly during the early morning deals on Wednesday. After closing at the record low on Tuesday, the Indian Rupee gained over one per cent, the most since May 23, to 90.0963. However, FOREX market experts believe that such a pullback won’t be enough for the Indian Rupee to shed its weakest Asian currency tag. They said that the Rupee has gained after the RBI’s intervention, and the RBI won’t be able to support the national currency beyond a specific limit. They stated that the withdrawal of money by FIIs from the Indian markets is one of the primary reasons for the Indian Rupee losing its ground, and a trend reversal by FIIs is possible only when there is permanent normalcy in India-US trade relations.
INR vs USD: What is dragging the Indian currency?
On triggers that dragged the Indian Rupee 6% in YTD, Anindya Banerjee, Head of Currency & Commodity Research at Kotak Securities, said, “The Rupee slipped to a fresh all-time low on Tuesday, crossing the 91 mark, making it one of the weakest major currencies globally this year and the weakest in Asia in 2025 so far. The pressure on the currency is being driven by three key factors: sentiment, capital flows, and the global macro backdrop.”
Delay in India-US trade deal fuels FIIs’ outflow
“On sentiment, uncertainty around the pending India–US trade deal and the broader trade-war environment is weighing on markets. From a flows perspective, foreign portfolio investors have pulled out close to USD 2.7 billion in the first two weeks of December alone, already among the largest monthly outflows this year, with the month still unfinished,” said Anindya Banerjee of Kotak Securities.
“FIIs’ selling is the major reason for the sharp fall in the Indian Rupee. They have been selling in the Indian market since July 2025, when Trump’s tariffs began to impact Indian businesses in the US market. This tariff still exists. Therefore, we can expect the fundamentals to improve once this tariff issue is settled permanently,” said Sandeep Pandey, Co-founder of Basav Capital.
Pointing towards the key factors that may enable the India Rupee to regain its lost ground, Sandep Pandey said, “The India-US trade deal is expected to address this issue. There are some positive developments in the India-US trade deal, and an outcome can be expected by the end of March 2026, or in other words, by the end of FY26. Even if the deal is inked in the first quarter of CY26, its impact on the national economy will be felt in the next one to two quarters. So, the Indian Rupee is expected to remain volatile in FY26.”
Rupee vs Dollar: Near-term outlook
Speaking on the outlook of the Indian Rupee against the US Dollar, Anindya Banerjee of Kotak Securities said, “In the near term, the 90 level remains a key support, while 91.25 is an important resistance. A sustained break higher could open the door towards 92. The RBI’s relatively limited intervention so far appears deliberate. With India’s growth strong and inflation contained, policymakers may be comfortable allowing some currency depreciation, especially in a global trade-war environment where a weaker currency can support export competitiveness.”
On what the USD-INR technical chart suggests, Ponmudi R, CEO of Enrich Money, said, “The long-term USD/INR chart has been trading within a well-defined rising wedge structure for over a decade. Price action continues to form higher highs and higher lows, reinforcing the view that the broader trend remains firmly upward. At current levels, USD/INR is positioned in the upper half of its long-term rising structure, indicating trend continuation rather than a breakdown. There has been no violation of the pattern and no formation of lower lows, suggesting that the move remains controlled, orderly, and structurally intact.”
“The 88.00–86.50 zone represents the crucial support area, aligning with the lower boundary of the rising structure and consistently acting as a long-term demand zone. A decisive break below this band could expose the 85.00 level, which has historically served as an important intermediate support, absorbing deeper corrective phases. On the upside, the 91.00–92.00 range marks a key resistance and expansion zone near the upper boundary of the structure. A sustained move above this region would open the door to the next structural target zone, 94.00–96.00, over the medium term. This higher band also serves as a psychological reference for the longer term, contingent on a meaningful expansion of the upper boundary,” Ponmudi R of Enrich Money added.
The Enrich Money expert said the USD-INR outlook would change materially only in the event of a decisive breakdown below the rising structure. Until then, the broader market setup continues to reflect a structurally strong US Dollar and a gradually depreciating rupee, consistent with the long-term trend depicted on the chart.
Key Takeaways
- RBI’s intervention has temporarily strengthened the INR, but long-term recovery is uncertain.
- Foreign Institutional Investors (FIIs) withdrawing funds are a significant factor in the Rupee’s decline.
- The outcome of the India-US trade deal could impact the INR’s stability and investor sentiment moving forward.
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