The Indian Rupee (INR) fell at the open against the US Dollar (USD) on Wednesday. The USD/INR pair rose to around 89.35 as the Indian Rupee continues to perform weakly, with continued demand for the US dollar from Indian importers and in the overseas market.
Bankers said demand for the dollar, largely from importers and in the external market, had begun and weakened the rise, Reuters reported.
Another reason behind the continued weakness in the Indian Rupee is the constant inflow of foreign funds from the Indian stock market. So far in November, foreign institutional investors (FIIs) have been net sellers, cutting their stake by Rs. 17,227.42 crores.
Meanwhile, the US dollar has become fragile amid accelerating bets supporting further interest rate cuts by the Federal Reserve this year. So far in 2025, the Fed has cut interest rates by 50 basis points to 3.50%-3.75%, and is expected to cut them again at its December policy meeting amid weak labor market conditions.
New York Federal Reserve Bank President John Williams warned on Friday of slowing economic growth and a gradual slowdown in the labor market, while supporting the need for further adjustments in monetary policy. His dovish comments led to a significant rise in market expectations for a rate cut in December.
According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points to 3.50%-3.75% at the December meeting rose to 85.3% from 50.1% seen a week ago.
USD/INR Rate Forecast
On the daily chart, the USD/INR is trading at 89.3600. The 20-day EMA is rising at 88.9466 and the price is holding above it, maintaining a bullish bias. The average advanced steadily during the recent consolidation, supporting the uptrend. The RSI at 61.23 is positive and not in the overbought zone, which supports the trend-following appetite. As long as the pair remains above the rising average, declines may remain confined and the advance may be extended.
The moving average has held steep over recent sessions, and successive closes above it have maintained upward pressure. The RSI is holding around the low 60s, indicating healthy momentum without extension. A daily close below the 20-day EMA would ease the setup and could trigger a wider pause, while continued strength above the average would keep buyers in control.
Looking down, the August 21 low at 87.07 will serve as major support for the pair. On the upside, the all-time high near 89.85 will act as a major barrier.
(Technical analysis of this story was written with the help of an artificial intelligence tool)
Frequently asked questions about the Indian Rupee
The Indian Rupee (INR) is one of the currencies most sensitive to external factors. The price of crude oil (the country relies heavily on imported oil), the value of the US dollar – most trade is done in US dollars – and the level of foreign investment are all influencing factors. Direct intervention by the Reserve Bank of India (RBI) in the foreign exchange markets to maintain exchange rate stability, as well as the level of interest rates set by the RBI, are the major factors influencing the rupee.
The Reserve Bank of India (RBI) actively intervenes in the Forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the Reserve Bank of India is trying to keep inflation at its target of 4% by adjusting interest rates. Higher interest rates usually strengthen the rupee. This is due to the role of the “carry trade” in which investors borrow in countries with low interest rates in order to place their money in countries offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that affect the value of the rupee include inflation, interest rates, economic growth rate, trade balance, and inflows of foreign investment. A higher growth rate can lead to more foreign investments, leading to increased demand for the rupee. A less negative trade balance will eventually lead to a stronger rupee. Higher interest rates, especially real rates (interest rates below inflation) are also positive for the rupee. The risk environment could lead to greater inflows of FDI and indirect FDI (FDI and FII), which also benefits the rupee.
A higher rate of inflation, especially if it is relatively higher than its counterparts in India, is generally negative for the currency because it reflects a decline in the value of the currency through increased supply. Inflation also increases the cost of exports, causing more rupees to be sold to buy foreign imports, which represents a negative value for the rupee. Meanwhile, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the rupee, due to increased demand from international investors. The opposite effect holds for lower inflation.
