Indian Rupee trades higher at the start of holiday-shortened week in India

The Indian Rupee (INR) trades higher against the US Dollar (USD) at the start of the holiday-shortened week on Monday. Indian currency markets will remain closed on Tuesday and Wednesday on account of Diwali Laxmi Pujan and Balipratipada, respectively.

The USD/INR drops to near 87.90 even as United States (US) President Donald Trump has threatened that massive tariffs on imports from India will remain in effect unless the nation halts buying oil from Russia.

US President Trump reiterated tariff threats over the weekend after reporters raised questions about the credibility of his statement that India will halt purchasing seaborne crude oil from Russia. Last week, the Indian ministry denied Trump’s claim that Prime Minister (PM) Narendra Modi had assured him that New Delhi would halt buying oil from Moscow.

India’s massive oil purchases from Russia have been a major reason behind trade tensions between New Delhi and Washington for the past few months. The Washington raised tariffs on imports from New Delhi to 50%, which resulted in a significant depreciation in the Indian Rupee and a massive outflow of foreign funds from the Indian stock market.

However, Foreign Institutional Investors (FIIs) have reduced selling in Indian equities this month. So far in October, FIIs have sold shares worth Rs. 586.76 crores, which is way lower in comparison with the sell-off seen in the July-September period.  

US Trump expresses additional 100% tariffs on China won’t be sustainable

• A slight corrective move in the US Dollar during the Asian trading session after a decent opening has also continued to a positive opening of the USD/INR pair. At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops to near 98.45.
• Broadly, the US Dollar strives to gain ground as trade tensions between the US and China have eased, following comments from US President Trump that the additional 100% tariffs announced on imports from Beijing to Washington won’t be sustainable.
• “High tariffs were not sustainable, though it could stand,” Trump said, Fox Business reported. He signaled that his meeting scheduled with Chinese leader Xi Jinping at the Asia-Pacific Economic Cooperation meeting in South Korea later this month is on track and expected the meeting to be favorable for both nations. “I think we’re going to be fine with China, but we have to have a fair deal. It’s got to be fair,” Trump said.
• Before the Trump-Xi meeting, US Treasury Secretary Scott Bessent is scheduled to meet his Chinese counterpart. Vice Premier He Lifeng, later this week. Both are expected to discuss the recently announced export controls on rare earth minerals by Beijing. Ahead of the meeting, US President Trump has already clarified that he doesn’t want China to play “rare earth game with us”.
• On the domestic front, investors await the delayed Consumer Price Index (CPI) data for September and the preliminary S&P Global Purchasing Managers’ Index (PMI) data for October, which will be released on Friday.
• Meanwhile, traders remain confident that the Federal Reserve (Fed) will cut interest rates by more than 50 basis points (bps) in the remaining year, according to the CME FedWatch tool.

Technical Analysis: USD/INR drops below 88.00

USD/INR opens lower at the start of the week, dropping to near 87.90. The 50-day Exponential Moving Average (EMA) near 88.13 is acting as a key barrier for the USD/INR bulls.

The 14-day Relative Strength Index (RSI) falls below 40.00. A fresh bearish momentum could emerge as the RSI holds below that level.

Looking down, the August 21 low of 87.07 will act as a key support for the pair. On the upside, the 20-day EMA will be a key barrier.