USD/INR Declines as US-India Trade Tensions Ease
GlobePRwire
The Indian Rupee (INR) strengthened against the US Dollar (USD) on Wednesday amid improving sentiment over a potential US-India trade agreement. The USD/INR pair traded lower near 90.30, reflecting optimism following constructive discussions between India’s External Affairs Minister Subrahmanyam Jaishankar and US Secretary of State Marco Rubio. LFtrade brokers outline the main points of the topic with clarity and precision.
US-India Trade Talks Boost Rupee
Jaishankar shared an update on X (formerly Twitter), describing the discussion as constructive and covering several key strategic areas. He emphasized talks on trade, critical minerals, nuclear cooperation, defence, and energy, adding that both sides agreed to remain in close contact on these topics and other related issues.
US Ambassador to India Sergio Gor described the conversation as a “positive call,” noting that follow-up meetings are likely in February.
Easing trade frictions is a significant positive for the Indian Rupee, which was Asia’s worst-performing currency in 2025 due to high tariffs imposed by Washington on Indian imports. At the peak of tensions, the US raised tariffs on India to 50% and added an extra 25% punitive tariff for oil imports from Russia, severely impacting investor confidence.
Despite this progress, foreign institutional investors (FIIs) have been cautious. In January, FIIs remained net sellers in eight out of nine trading sessions, offloading stakes worth ₹16,925.03 crore amid uncertainty over the trade stalemate.
Inflation Data in Focus
Investors are now closely watching India’s Wholesale Price Index (WPI) inflation data for December, due at 12:00 PM IST (06:30 GMT). The WPI is expected to have risen by 0.3%, following a similar decline in November.
Steady inflation generally supports the US Dollar’s strength, as it underpins the Federal Reserve’s (Fed) monetary policy stance. Despite the INR’s gains, the US Dollar Index (DXY) remains strong, trading near a monthly high around 99.25, reflecting sustained demand for the Greenback against major currencies.
In the US, the Bureau of Labor Statistics (BLS) reported that headline CPI for December rose 2.7% year-on-year, while core CPI increased 2.6%, signaling moderate inflationary pressures. Richmond Fed President Tom Barkin described the data as “encouraging” and expects price pressures to remain modest in the coming months.
Meanwhile, the US President welcomed the steady figures, suggesting potential pressure on Fed Chair Jerome Powell to consider a rate cut. Powell, however, is currently under scrutiny for cost overruns in the Fed’s Washington HQ renovation, which he described as a pretext unrelated to monetary policy decisions.
Global central bank leaders have voiced support for Powell, emphasizing that central bank independence is vital for price, financial, and economic stability.
Investors will also focus on upcoming US Producer Price Index (PPI) data for October and November, as well as Retail Sales data for November, scheduled at 13:30 GMT, which could influence short-term USD sentiment.
Technical Analysis: USD/INR
From a technical standpoint, USD/INR trades near 90.3810, maintaining short-term upward bias above the 20-day Exponential Moving Average (EMA) at 90.29. The EMA is rising, indicating that the path of least resistance remains upward.
The 14-day Relative Strength Index (RSI) at 53 suggests neutral momentum, reflecting a balance between buying and selling pressures. A sustained close above the 20-day EMA would support further INR gains, while a drop below could signal a retracement toward key support levels.
If momentum continues to build, the pair may test 90.00 and possibly challenge longer-term resistance near 91.50. Conversely, a weakening RSI near the midline could favor consolidation, limiting significant intraday movements.
Market Outlook
The easing of US-India trade tensions, combined with moderate inflation data in both countries, is providing temporary relief to the INR, even as USD strength persists globally. Analysts suggest that continued dialogue between India and the US will be a key driver for sustained INR appreciation, while FIIs’ cautious stance may cap sharp gains in the short term.
Macro factors such as oil prices, global interest rate policies, and geopolitical developments will continue to influence USD/INR volatility. In the near term, the trade narrative remains the most potent catalyst for currency movements, and traders are likely to remain sensitive to any official statements or policy updates from both nations.
Conclusion
In summary, the Indian Rupee has strengthened against the US Dollar as trade talks between India and the US show progress. Positive commentary from Jaishankar and Gor has boosted market sentiment, while technical indicators show a short-term bullish bias for USD/INR.
However, investors remain cautious, closely watching inflation data, FII flows, and geopolitical developments. A sustained improvement in trade relations could support further INR gains, while any setback may trigger a retracement toward psychological levels near 91.50.
The coming weeks will be crucial as markets weigh macro fundamentals, technical signals, and diplomatic developments to determine the USD/INR trajectory.