The Indian Rupee (INR) opened the week on a soft note, trading around 88.95 per US Dollar on Monday — close to a two-week low — as the Greenback extended its rally amid fading expectations for further Federal Reserve (Fed) rate cuts in December. The USD/INR pair looks poised to extend its six-day winning streak, with foreign investor outflows and a strong USD weighing on the domestic currency.
Foreign outflows ease but sentiment remains cautious
Data from the National Securities Depository Ltd. (NSDL) shows that Foreign Institutional Investors (FIIs) offloaded ₹2,346.89 crore worth of Indian equities in October, marking the fourth consecutive month of net selling. However, the pace of withdrawals has slowed considerably compared with the ₹43,290 crore average monthly outflow seen between July and September.
Market analysts note that FIIs remain cautious amid delayed progress in trade negotiations between India and the United States. While both sides have indicated they are nearing an agreement, a formal deal has yet to materialize.
Meanwhile, a Reuters report suggests that the Reserve Bank of India (RBI) may intervene in the foreign exchange market if the USD/INR pair approaches its record high of 89.12, last seen in late September.
US Dollar strengthens as Fed trims dovish tone
The US Dollar Index (DXY) continues to climb, reaching a three-month high near 99.85, buoyed by comments from Fed Chair Jerome Powell and other policymakers who have signaled a more cautious stance on further rate cuts.
At last week’s meeting, the Federal Reserve lowered interest rates by 25 basis points (bps) to 3.75%–4.00%, its second consecutive cut. However, Powell emphasized that another reduction in December was “far from assured,” citing mixed views among Federal Open Market Committee (FOMC) members.
Market pricing now reflects a 69.3% chance of a 25 bps rate cut in December, down sharply from 91.7% a week earlier, according to the CME FedWatch Tool. Several Fed officials, including Cleveland Fed President Beth Hammack, have advocated maintaining a restrictive policy stance to contain inflation, which remains above the 2% target.
Conversely, Fed Governor Christopher Waller argued in favor of further rate cuts, citing potential labor market risks while expressing confidence that inflation will continue to moderate.
Technical outlook: USD/INR eyes record high near 89.10
Technically, USD/INR maintains a bullish bias, trading above the 20-day Exponential Moving Average (EMA) at 88.54. The 14-day Relative Strength Index (RSI) has climbed above 60.00, indicating growing bullish momentum.
On the upside, a break above the all-time high of 89.12 could open the door to fresh record levels. On the downside, initial support lies near the August 21 low of 87.07.
