Is RBI's Intervention Enough to Stabilize USD/INR Near 90.80?

The USD/INR currency pair is trading flat around 90.80 on Thursday morning, as market participants brace for potential Reserve Bank of India (RBI) support for the Indian Rupee. Traders are anticipating renewed central bank action, noting a “high probability” of intervention today. The currency has experienced notable volatility—just 0.03 USD to INR swings have become routine—reflecting the intense pressure on the domestic unit.

What Triggered Wednesday’s RBI Intervention?

On Wednesday, the RBI demonstrated its commitment by aggressively selling US Dollars across both spot and non-deliverable forward markets. This defensive action came as the pair surged to record highs of 91.55, prompting the central bank to step in and prevent further rupee deterioration. The move temporarily arrested the one-way selling momentum that has plagued the currency for weeks.

FII Activity Shows Signs of Reversal

A surprise development emerged on Wednesday when Foreign Institutional Investors switched to net buying mode after consistently offloading holdings. The reversal resulted in net purchases worth Rs. 1,171.71 crore. This shift came as the US-India trade tensions persist, which has been the primary driver of foreign selling. While the sudden buying interest could spark short-term risk appetite, market participants remain skeptical about sustained momentum without a concrete trade deal announcement.

Technical Setup: RSI and Moving Average in Focus

From a technical standpoint, USD/INR is consolidating at 90.7840, sitting comfortably above the 20-day exponential moving average (EMA) at 90.2106. The Relative Strength Index (RSI) stands at 63.40—in bullish territory—indicating that while momentum has eased from overbought extremes, upward pressure remains intact. As long as daily closes hold above the 20-day EMA, bulls retain the upper hand. A decisive break below this support band would shift the bias to neutral and invite deeper corrective moves in the pair.

Dollar Dynamics: Fed Policy Under Microscope

The USD/INR sideways action is partly attributable to a mixed US Dollar performance. The Dollar Index tracks at 98.45, up marginally, yet uncertain about its near-term direction. Market sentiment has shifted as traders reassess Federal Reserve rate cut prospects for 2026. The CME FedWatch tool shows only a 24.4% probability of a 25 basis points rate cut in January, compared to earlier dovish expectations.

However, looming uncertainty surrounds the Fed’s future leadership. President Trump’s recent statements about appointing a new Federal Reserve chairman who favors “lower interest rates, by a lot” have raised concerns about institutional independence. Such developments typically weigh on US Dollar strength and could provide relief to the rupee if confirmed.

Inflation Data on Deck

Thursday’s session will pivot around US Consumer Price Index data for November, due at 13:30 GMT. Market forecasts suggest both headline and core CPI will maintain an annualized pace of 3%. This inflation reading will be critical in shaping interest rate expectations and could either reinforce or challenge current Fed policy assumptions. For currency traders, this data represents a key inflection point for the USD’s trajectory.

Rupee Fundamentals: Understanding the Pressure

The Indian Rupee’s structural weakness reflects multiple headwinds. Foreign investors have been systematically reducing exposure to Indian equities amid trade policy uncertainties, consistently pressuring the rupee’s value. Oil imports, which remain dollar-denominated, add additional demand for US currency. Meanwhile, the RBI’s intervention capacity, while effective in the short term, cannot permanently reverse weakness without addressing underlying foreign capital flows and external trade imbalances.

Interest rate differentials between India and the US, along with macroeconomic factors such as inflation, GDP growth, and foreign direct investment flows, will ultimately determine the rupee’s longer-term trajectory. Without meaningful resolution to the trade stalemate, the RBI may face recurring intervention needs to maintain exchange rate stability.