The Indian Rupee (INR) fell to a new low in almost two weeks against the US Dollar (USD) at the open on Monday. The USD/INR pair jumps to nearly 90.50 as the Indian currency weakens, following US President Donald Trump’s threats that he may increase tariffs on imports from India for not supporting Washington in resolving the Russian oil problem.
US President Trump said: “We can increase tariffs on India if it does not get help on the Russian oil issue.” Trump added: “They wanted to make me happy. Prime Minister Modi is a very good man. He is a good man. He knew I was not happy. It was important that they make me happy. They are doing trade, and we can raise tariffs on them very quickly.”
US President Trump’s threat to impose tariffs on India has renewed trade frictions between the two countries. In 2025, Trump raised import duties on India to 50%, which included a punitive 25% duty on oil purchases from Russia.
Trade tensions between the United States and India have led to a significant increase in demand for the US dollar by Indian importers and an inflow of foreign funds from the Indian stock market. Strong demand for the US dollar pushed the USD/INR pair to an all-time high of 91.55 and forced the Reserve Bank of India (RBI) to intervene in the spot and non-deliverable futures (NDF) markets to support the Indian rupee.
In 2025, foreign institutional investors (FIIs) reduced their stake by Rs. 3,06,418.88 crore in Indian stock market. It was also found that FIIs were overall net sellers in the first two trading days of January 2026 and unloaded their stake worth Rs. 2,978.80 Crores.
Daily summary Market drivers: US dollar gains due to geopolitical risks
- The USD/INR pair’s positive start to the week is also driven by the strength of the US dollar due to risk-off market sentiment. At press time, the US Dollar Index (DXY), which tracks the value of the dollar against six major currencies, is trading 0.35% higher near 98.80.
- Investors are risk averse following the US strike on Venezuela, the arrest of President Nicolas Maduro on drug trafficking charges in New York, and US President Trump’s threats to take action on Colombia and Iran as well.
- Rising geopolitical risks have forced investors to turn to the safe-haven fleet, improving demand for bullion, base metals and the US dollar.
- US President Trump also stated that Washington would take charge and restructure Venezuela’s oil industry, which accounts for 7% of global reserves or 303 billion barrels, according to the London-based Energy Institute.
- The US-led takeover of Venezuela’s oil industry is expected to have a significant impact on the Indian economy, assuming that additional supplies of oil will lead to lower energy prices. Given that India is one of the largest oil importing countries in the world and meets 85% of its energy needs from imported oil, a decline in crude oil prices will be in favor of the Indian rupee.
- Going forward, the US dollar is expected to trade volatile in a week of US data, starting with the December ISM Manufacturing PMI data, which will be published at 15:00 GMT. The ISM Manufacturing PMI is expected to come in slightly higher at 48.3 from 48.2 in November, indicating that activity has contracted again, but at a slightly moderate pace.
- A notable release this week will be the non-farm payrolls (NFP) data for December, which is scheduled to be released on Friday. US NFP data will have a major impact on market expectations for the Federal Reserve’s monetary policy announcement later this month.
- According to the CME FedWatch tool, the Fed is expected to keep interest rates steady in the current range of 3.50%-3.75% in the policy announcement on January 28.
Technical Analysis: The USD/INR pair rose to around 90.50 level
On the daily chart, the USD/INR is trading at 90.4470. The 20-day exponential moving average (EMA) is sloping higher at 90.2130, maintaining a modest bullish bias. The price stabilizes above the scale, indicating continued decline in demand.
The 14-day Relative Strength Index (RSI) at 56.86 is on the rise, confirming strong momentum.
Initial support is located at the bullish 20 EMA; A daily close below it would dampen the upside and lead to a deeper bounce towards the December low at 89.50. While the all-time high at 91.55 will remain a major hurdle on the upside.
(The technical analysis for this story was written with the help of an artificial intelligence tool.)
