USD/INR Holds Near 88.40 Amid Optimism Over US-India Trade Deal

The USD/INR opened flat but has since appreciated by 0.43% trading around 88.20 at the time of writing. During the Asian trading session, the U.S. Dollar index (DXY), which tracks the greenback’s value against six major currencies, traded flat near 99.00. It suggests the pair’s movement was largely driven by domestic factors in India.

Market sentiment is improving amid growing optimism over a potential US-India trade deal. Let’s look at the key updates on the U.S.-India trade deal, the fundamentals driving the U.S.Dollar and the Indian Rupee, and the technical outlook for the USD/INR pair.

The US-India Trade Deal Updates:

The US-India trade relations have been tense since the US President Donald Trump ended India’s special trade status under the GSP program and raised tariffs on many Indian imports, citing broader trade imbalances:

• This morning, the External Affairs Minister S.Jaishankar had a meeting with the US Secretary of State Marco Rubio in Kuala Lumpur, to discuss international relations and ongoing trade negotiations between their nations.
• Following this meeting, Dr.S.Jaishankar posted on X-platform (formerly Twitter) that he “appreciated the discussion on our bilateral ties as well as regional and global issues.”
• The statement suggests that both nations are finalizing a proposed bilateral agreement.
• According to a Bloomberg report on Friday, The indian Commerce and Industry Minister Piyush Goyal stressed that India will not rush into a deal:

We don’t do deals in a hurry, and we don’t do deals with deadlines, with a gun on our head.

• Goyal further pointed out that deal agreements are about more than “tariffs”. It also includes “trust, long-term relationships, and creating sustainable frameworks for global business cooperation.”

A successful agreement could strengthen supply chains, attract foreign direct investment, and boost India’s export potential. This will shape the medium-term USD/INR trends.

The Main Fundamentals Influencing the USD/INR:

• Soft US inflation data: The consumer price index rose 0.3% (headline) and 0.2% (core) month-on-month. Yearly, headline inflation stood at 3%, softer than the expected 3.1%.
• Weaker inflation gives the Fed more flexibility to focus on supporting the slowing labor market. Market participants now widely expect a 25 basis point cut in the upcoming policy meeting.
• US-China trade optimism: The easing of trade tensions supports overall market sentiment. US Treasury Secretary Scott Bessent suggested that 100% additional tariffs on China and rare earth export restrictions may be deferred after talks with Chinese Premier He Lifeng.
• Signs of slowdown in foreign fund outflows may support the indian rupee. So far this month, FIIs have sold 244.02 crores over the past three months.
• Despite a flat USD, the Indian Rupee struggles to gain, reflecting limited domestic support and global uncertainty. Moreover, improved fund flows could offer near-term support.

The Technical Outlook for the USD/INR :

Based on the daily chart, the USD/INR is currently trading between the resistance level at 88.40 and the support level at 87.52. As expected in my previous technical analysis, the pair is likely to retest the 88.40 level, and it is now very close to doing so.

A clear daily close above 88.40 could pave the way toward the 89.18 level. The RSI is currently at 50, which is considered a neutral point, suggesting a weak short-term momentum. The market is in a phase of consolidation.