USD/INR Climbs to 90.20 as Trade Frictions Persist Despite RBI Support

The USD/INR pair continues its upward trajectory to near 90.20 levels on Thursday morning, as the Indian Rupee struggles to maintain ground despite intervention efforts by India’s central bank. The rupee’s weakness persists even after the Reserve Bank of India (RBI) was reported to have intervened on Wednesday, marking its first aggressive US Dollar sale of the year to stem excessive one-way depreciation pressure. The move reflects growing challenges for the Indian currency in the face of broader macroeconomic headwinds and shifting market dynamics.

The currency pair’s resilience near 90.20 underscores the battle between official support measures and underlying market forces. Indian importers, encouraged by rupee weakness at these levels, have stepped up their demand for US Dollars to lock in favorable conversion rates, offsetting the RBI’s stabilization efforts. This dynamic reveals the tug-of-war between policymakers attempting to defend the rupee’s value and commercial entities capitalizing on near-term opportunities.

Underlying Pressures: Trade Tensions and Capital Outflows

The Indian Rupee faces multiple headwinds that extend beyond typical currency volatility. US-India trade relations have deteriorated since the middle of 2025, when Washington imposed a 50% tariff on Indian oil imports from Russia. This week, US President Donald Trump escalated rhetoric by threatening additional tariff increases on New Delhi, further straining bilateral economic ties. The tariff threats have created uncertainty, deterring foreign investors from committing fresh capital to Indian equities.

The withdrawal of foreign capital compounds the rupee’s woes. Foreign Institutional Investors (FIIs) maintained a net selling position in eight of the twelve months during 2025, signaling reduced international appetite for Indian assets. So far in January, overseas investors have liquidated equity positions worth approximately Rs. 4,650.39 crore, intensifying the currency depreciation bias. With less dollar inflow from foreign investment, the supply-demand imbalance tilts against the Indian currency.

Market Drivers: US Dollar Gains on Economic Resilience

The USD/INR pair’s upside momentum is simultaneously fueled by underlying strength in the US Dollar itself. The US Dollar Index (DXY), which gauges the Greenback’s performance against six major currencies, posted modest gains following the release of stronger-than-expected US services sector data in December. The Purchasing Managers’ Index (PMI) for Services expanded to 54.4, exceeding forecasts of 52.3 and the prior month’s reading of 52.6, indicating robust economic activity in America’s dominant services sector.

Supporting components of the Services PMI, including employment and new orders metrics, also printed above expectations, painting a picture of resilience in the US economy. However, this optimism faced headwinds from disappointing employment figures. Private sector job creation in December fell short at 41,000 new positions against estimates of 47,000, while the count of new job openings in November totaled 7.15 million versus expectations of 7.6 million.

The mixed labor market signals created an intriguing dynamic: stronger service sector growth paired with softening job market indicators. This combination may encourage market participants to increase positioning for potential interest rate reductions by the Federal Reserve in its upcoming policy decisions. Such rate cuts could theoretically weaken the dollar, though near-term USD/INR movements suggest other factors currently dominate.

Technical Roadmap: Can USD/INR Hold the 20-Day Average?

From a technical perspective, USD/INR trades marginally below the 20-day Exponential Moving Average (EMA) positioned at 90.2025. This critical moving average, which has begun to flatten and roll over, currently caps attempts at further upside extension. The 14-day Relative Strength Index registers at 49, reflecting neutral momentum without a decisive directional bias.

The pair’s near-term destiny hinges on breaching this key technical level. A daily close above the 20-day EMA would reinvigorate bullish momentum and potentially reopen an advance toward the all-time high of 91.55. Conversely, failure to overcome this barrier threatens a reversal toward lower levels, with potential support emerging near the December 19 low of 89.50. For traders monitoring USD/INR, these technical checkpoints will prove instrumental in determining whether the currency pair extends its rally or consolidates current gains.