USD/INR Falls as Indian Rupee Strengthens on RBI Moves and US-China Trade Optimism

USD/INR Falls as Indian Rupee Strengthens on RBI Policy and US-China Trade Hopes

The USD/INR pair begins the week lower, with the Indian Rupee (INR) continuing its Friday rally. The Rupee benefits from positive sentiment driven by an accommodative Reserve Bank of India (RBI) policy announcement and renewed optimism ahead of US-China trade talks.

RBI's Aggressive Easing Signals Policy Pause

The RBI stunned markets last Friday by cutting its Repo Rate by 50 basis points, exceeding economists’ expectations of a 25 bps cut. In a further liquidity-boosting measure, it also reduced the Cash Reserve Ratio (CRR) by 100 bps, freeing up ₹2.5 lakh crore for bank lending.

Surprisingly, despite these dovish moves, the Rupee strengthened because the RBI shifted its policy stance from 'accommodative' to 'neutral', effectively signaling an end to further rate cuts in the near term. This was perceived as a stabilizing signal for India’s macroeconomic outlook.

Global Tailwinds: Trade Talks and US Dollar Weakness

The US Dollar weakened modestly ahead of the anticipated trade talks between the United States and China, scheduled to begin Monday in London. Traders are optimistic that renewed discussions could de-escalate trade tensions and improve global risk sentiment — a boost for emerging market currencies like the Rupee.

Friday’s strong US Nonfarm Payrolls data initially gave the Dollar a lift, but expectations that the Federal Reserve will hold rates steady have curbed further USD strength.

Technical and Market Outlook

• USD/INR is likely to find immediate support near 82.65 and face resistance near 83.10.
• A break below current levels could open room for further INR gains, particularly if US-China talks show tangible progress.
• On the macro front, India's liquidity injections and strong reform signals support the Rupee in the medium term.

Related Tredu Reads:

• RBI Shocks Markets with 50 bps Rate Cut and CRR Reduction
• How US-China Trade Talks Could Shape Emerging Markets
• USD/INR Outlook: Will the Rupee Sustain Its Momentum?

Conclusion

The Indian Rupee’s strength on Monday reflects a mix of domestic policy support and global trade optimism. As the RBI signals a pause in rate cuts and global attention turns to US-China negotiations, the USD/INR pair remains in focus for forex traders assessing short-term volatility and long-term directional bias.