Indian Rupee gains on hopes of RBI’s follow-through intervention

The Indian Rupee (INR) moves higher against the US Dollar (USD) after a flat opening on Thursday. The USD/INR pair drops to near 90.50 amid expectations that the Reserve Bank of India (RBI) could intervene again to support the Indian Rupee.

There is a “high probability” that the central bank may step in again today, traders said, Reuters reported.

On Wednesday, the RBI sold US Dollars aggressively in both spot and non-deliverable forward (NDF) markets to halt the one-way rally in the pair when it hit record highs at 91.55.

The Indian Rupee has been underperforming the US Dollar for a long period, as foreign investors are consistently offloading their stake in the Indian stock market due to the United States (US)- India trade stalemate. This month, Foreign Institutional Investors (FIIs) remained net sellers on all trading days, but have surprisingly turned out to be net buyers on Wednesday. The net purchase by FIIs on Wednesday was Rs. 1,171.71 crore worth of shares.

A sudden halt in FIIs’ selling in the Indian equity market might boost risk sentiment; however, the impact would be short-lived, given the absence of an announcement on a US-India trade deal.

Trump signals new Fed Chairman would support more interest rate cuts

• The Indian Rupee holds recovery against the US Dollar on Thursday, while the latter trades flat ahead of the US Consumer Price Index (CPI) data for November, which will be published at 13:30 GMT. At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally higher at near 98.45.
• The inflation data will influence market expectations for the US interest rate outlook. Economists expect the US headline inflation rate to have risen to 3.1% year-on-year, up from 3% in October. The core CPI – which excludes volatile food and energy items – is expected to have grown steadily by 3%.
• In the last two trading days, the US DXY regained ground after hitting a fresh 10-week low near 98.00 on expectations that there will be no interest rate cut in the first policy meeting of 2026. According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 25 basis points (bps) to 3.25%-3.50% in the January meeting is 24.4%.
• Traders hesitate to raise Fed dovish bets as Chairman Jerome Powell stated in last week’s policy meeting that “the bar for another interest rate cut is very high.”
• Broadly, the US Dollar seems on the back foot as Fed Chair Powell’s successor is expected to support more interest rate cuts in his term, assuming that his decisions would be more biased towards US President Donald Trump’s economic agenda.
• Earlier in the day, US President Trump said in a national address, “I’ll soon announce our next chairman of the Federal Reserve, someone who believes in lower interest rates, by a lot, and mortgage payments will be coming down even further.” Such a scenario will hurt the Fed’s independence and weigh on the US Dollar.

Technical Analysis: USD/INR holds key 20-day EMA

USD/INR trades lower at around 90.50 on Thursday. While the upward bias remains intact, as the pair holds above the rising 20-day Exponential Moving Average (EMA). which is at 90.2106. The 20-day EMA continues to slope higher, keeping pullbacks contained.

The 14-day Relative Strength Index (RSI) at 63.40 stays in bullish territory after easing from overbought, confirming firm momentum.

Bulls retain control while daily closes remain above the 20-day EMA, with dips expected to find support in that band. A decisive break below the 20-day EMA would be followed by a deeper retracement to near the September 24 high at 89.12. Looking up, the spot could advance to 92.00 if it rises above Wednesday’s high of 91.55.

(The technical analysis of this story was written with the help of an AI tool)