USD/INR Opens Lower as Trump Signals US-India Trade Deal Progress

10 Sept 2025 04:55

• Indian Rupee strengthens against USD as Trump expresses optimism about resolving trade tensions
• Foreign investors reversed course, becoming net buyers in Indian equities on September 9
• Markets awaiting crucial US inflation data this week

The Indian Rupee is gaining ground against the US Dollar Wednesday morning, pushing the USD/INR pair down as hopes rise for a resolution to the trade tensions between the two nations.

Trump’s recent comments on Truth.Social have sparked this optimism. “India and the US are continuing negotiations to address Trade Barriers,” he wrote, adding that he looks forward to speaking with “my very good friend, Prime Minister Modi” soon. He expressed confidence they would reach “a successful conclusion for both our Great Countries!”

Modi responded positively on X, calling India and the US “close friends and natural partners” while expressing confidence that trade talks would “unlock the limitless potential” of their relationship. He confirmed their teams were working to conclude discussions quickly.

This diplomatic exchange comes after a particularly rough patch in US-India relations, when Washington slapped 50% tariffs on Indian imports in August, claiming that India’s Russian oil purchases were effectively funding Moscow’s war in Ukraine.

Foreign investors, who had been selling Indian equities since the beginning of September, reversed course Tuesday, purchasing Rs. 2,050.46 crores worth of stocks. Indian markets have responded enthusiastically to the trade deal optimism, with Nifty50 opening higher and trading up 0.56% around the 25,000 mark.

Market Movers: All Eyes on US Inflation Data

• The Rupee’s gains come despite the Dollar Index stabilizing after hitting a six-week low around 97.25.
• The greenback found temporary support even after the devastating NFP benchmark revision showing 911K fewer jobs created than previously thought. This suggests labor market deterioration began before Trump’s tariff announcements.
• FOMC members had already flagged increasing labor market risks and argued for monetary policy easing.
• Investors are now focused on this week’s US Producer Price Index (Wednesday) and Consumer Price Index (Thursday) for August. These reports could reveal early tariff impacts on inflation, though most Fed officials, including Powell, have dismissed tariff-driven price increases as temporary.
• The inflation readings will shape expectations for next week’s Fed meeting, where traders are certain of a rate cut but divided on size. The CME FedWatch tool shows just 8.4% probability of a 50bps cut, with most expecting a standard 25bps reduction.
• Economists predict moderate 0.3% monthly growth in both headline and core PPI, with annual headline PPI at 3.3% and core PPI slowing to 3.5% from July’s 3.7%.

Technical Analysis: Bullish Trend Persists Despite Dip

USD/INR has slipped to around 88.25 today, but remains bullish while trading above its 20-day Exponential Moving Average near 87.85. The 14-day RSI has fallen to approximately 60.00, with fresh upward momentum likely if it holds above this level.

The 20-day EMA provides key support, while the psychological 89.00 level represents significant resistance.

Indian Rupee FAQs

Key Drivers

The Rupee responds heavily to oil prices (India depends heavily on imports), USD value, foreign investment flows, and RBI intervention. The central bank’s interest rate decisions also significantly impact the currency.

RBI’s Influence

Beyond direct forex market intervention, the RBI uses interest rates to target 4% inflation. Higher rates typically strengthen the Rupee through increased carry trade activity.

Macroeconomic Factors

The Rupee’s value is shaped by inflation, interest rates, GDP growth, trade balance, and foreign investment inflows. Stronger economic growth attracts more overseas investment, boosting Rupee demand.

Inflation Impact

Higher inflation generally weakens the Rupee by devaluing it and increasing import costs. However, the RBI’s response of raising interest rates can paradoxically strengthen the currency by attracting foreign investors.

Disclaimer: For information purposes only. Past performance is not indicative of future results.