The Indian Rupee (INR) weakened against the US Dollar (USD) on Thursday, with the USD/INR pair climbing toward 88.85 during the afternoon session. The Greenback recovered from early losses after upbeat developments in US–China trade talks and hawkish signals from the Federal Reserve (Fed) boosted market confidence in the Dollar.
At the time of writing, the US Dollar Index (DXY) — which tracks the USD’s performance against six major currencies — was trading flat near 99.15.
Trump–Xi Meeting Sparks Optimism Over Trade Relations
Following their meeting in South Korea, US President Donald Trump described discussions with Chinese President Xi Jinping as “amazing.” Trump announced that tariffs on Chinese imports would be reduced to 47% from 57%, while China would resume rare-earth exports to the United States and increase purchases of US soybeans.
Beijing’s Commerce Ministry confirmed that it would suspend rare-earth export controls for one year and that both sides had reached agreements on fentanyl cooperation and plans to expand agricultural trade.
The positive tone from both leaders supported global risk sentiment, though the Dollar’s rebound weighed on emerging market currencies, including the Rupee.
Rupee Lags Peers as FIIs Stay Cautious
The Indian Rupee underperformed most of its Asian counterparts on Thursday amid investor caution toward Indian equities. While Foreign Institutional Investors (FIIs) have turned marginally positive in October, buying shares worth around ₹7,500 crore, sentiment remains fragile following months of heavy selling.
Uncertainty persists as markets await confirmation of a long-anticipated US–India trade deal. According to Bloomberg, negotiators have resolved most key issues, and an announcement could come soon, though investors remain hesitant until an official statement is made.
Fed’s Powell Dampens Rate-Cut Hopes
The Federal Reserve cut interest rates by 25 basis points, lowering the Fed Funds Rate to 3.75%–4.00%, but Chair Jerome Powell signaled that another cut in December is unlikely.
“Today’s cut was about risk management, but another cut in December is far from assured,” Powell said during his post-meeting press conference. He added that while inflation risks have moderated since April, the Fed remains cautious given mixed signals from the labor market.
Powell’s hawkish tone fueled a rebound in the US Dollar, driving USD/INR higher.
Technical Outlook: USD/INR Eyes 89.10 Resistance
Technically, USD/INR has regained momentum, trading back above its 20-day Exponential Moving Average (EMA) near 88.44, confirming a short-term bullish bias. The 14-day Relative Strength Index (RSI) is trending toward 60.00, suggesting strengthening upside momentum.
On the downside, support lies at 87.07 (August 21 low), while a decisive break above the 89.12 all-time high could open the door toward the 89.50–89.70 zone.
US Federal Reserve – Quick Facts
What does the Fed do, and how does it affect the US Dollar?
The Federal Reserve (Fed) manages US monetary policy with the dual mandate of ensuring price stability and maximum employment. When inflation rises above the 2% target, the Fed raises interest rates, supporting the Dollar. Conversely, when inflation or growth slows, the Fed may cut rates, which tends to weaken the USD.
What is Quantitative Easing (QE)?
QE involves the Fed purchasing government bonds to inject liquidity into the financial system during periods of economic stress. This typically leads to a weaker Dollar due to an increase in money supply.
What is Quantitative Tightening (QT)?
QT is the opposite of QE — the Fed reduces its bond holdings, limiting liquidity in the system. This generally supports a stronger US Dollar.
✅ Summary:
The USD/INR pair surged toward 88.85 as the US Dollar strengthened on improved US–China trade relations and hawkish Fed commentary. Despite mild FII inflows, investor caution and a firm Greenback continue to pressure the Indian Rupee, while technical indicators suggest room for further upside toward 89.10.
