USD/INR remains relatively stable as Indian equities see limited overseas investment

Indian Rupee Remains Weak Amid Limited Foreign Investment

On Friday, the Indian Rupee (INR) opened unchanged against the US Dollar (USD), staying close to its lowest point in over three weeks. The USD/INR exchange rate remains firm near 91.20, as the Indian equity market continues to face challenges in attracting overseas investors.

Data from the NSE reveals that foreign capital inflows into Indian stocks have been inconsistent, even after the US and India announced a trade agreement in early February. This month, Foreign Institutional Investors (FIIs) have purchased shares worth Rs. 895.58 crore—a modest sum compared to the substantial outflows recorded over the past seven months.

On February 2, both nations acknowledged President Donald Trump's announcement of a trade deal, under which the US agreed to reduce tariffs on imports from India to 18% from 50%, including the removal of 25% punitive tariffs.

Elsewhere, the Indian Rupee has not benefited from signs of easing tensions between the US and Iran. Oman's Foreign Minister, Badr al-Busaidi, reported early in the session that nuclear negotiations between the two countries have made "significant progress," with further talks scheduled next week in Vienna.

Despite these developments, the positive US-Iran discussions have not had a notable effect on oil prices, leaving the Rupee unsupported. At the time of writing, WTI crude is trading 0.3% lower, around $65.25. The Indian economy’s heavy reliance on oil imports makes the Rupee particularly sensitive to fluctuations in energy prices.

Domestic Outlook and Upcoming Economic Data

Investors are now awaiting the release of fourth-quarter Gross Domestic Product (GDP) figures, scheduled for 04:00 PM IST (10:30 GMT). Expectations are for the economy to have grown at an annual rate of 7.2%, which would mark a slowdown from the 8.2% expansion seen in the previous quarter.

Global Currency and Trade Developments

During the Asian trading session, the US Dollar is showing little movement and is likely to finish the week with minimal overall change following recent tariff-related volatility. The US Dollar Index (DXY), which measures the currency against six major peers, has edged down to around 97.70.

Earlier this week, President Trump announced a 10% global tariff, with US Trade Representative Jamieson Greer indicating that rates could be raised to 15% or higher for certain countries. The White House has called for worldwide tariffs to counteract the effects of a Supreme Court decision against Trump’s tariff policy, handed down on February 20.

Federal Reserve Policy and Market Expectations

On the monetary policy front, traders largely anticipate that the Federal Reserve will keep interest rates unchanged during its March and April meetings, according to the CME FedWatch tool. This expectation is driven by persistent inflation levels above the central bank’s 2% target.

On Thursday, Austan Goolsbee, President of the Chicago Fed, expressed support for multiple rate cuts this year but advised against implementing them too quickly, noting that inflation remains above the desired threshold. “Rates can come down, but don't want to front-load before inflation eases,” Goolsbee told Fox News.

USD/INR Technical Overview: Pair Holds Above 91.00

The USD/INR pair is trading nearly flat around 91.20, maintaining a slight bullish tone as it stays above the 20-day Exponential Moving Average (EMA), which is currently level just below the spot price.

The 14-day Relative Strength Index (RSI) is approaching 60.00, indicating positive but moderate momentum rather than a strong upward trend.

• Immediate support is found at the 20-day EMA near 90.94. A drop below this level could expose the recent reaction low at 90.58, followed by deeper support at the February 3 low of 90.15.
• On the upside, initial resistance is at the January 22 low of 91.35, with further resistance at the January 28 low of 91.66.

(Technical analysis for this section was assisted by an AI tool.)