USD/INR Retests Its All-Time High as the Rupee Underperforms Its Peers

The USD/INR starts the week by revisiting its all-time high. It advances by 0.22%, trading around the 90.86 level. The Indian Rupee underperforms its peers due to the consistent foreign investment outflows. Selling pressure in indian equities is weighing on the Indian rupee, amid a lack of updates on US-India trade discussions.

This article examines recent developments in foreign institutional investment (FII) flows in India and their impact on the USD/INR exchange rate. It also analyzes key macroeconomic factors in both India and the US, before concluding with the technical outlook for the USD/INR currency pair.

Recent FII Trends and USD/INR Implications:

• For four or twelve months in 2025, the foreign institutional investors have been net sellers.
• In January 2026, FIIs remained net sellers, selling Indian equities worth Rs. 26,052.40 crore. Last Friday, they sold shares worth 4,346.13 as per exchange data.
• Equities remained under pressure, with the Sensex Index falling 324 points or 0.39%, while the benchmark Nifty index declined 108.85 points or 0.42% to 25,585.

India–US Macroeconomic Dynamics and Their Impact on USD/INR:

• Market participants are waiting for the fiscal budget announcement by Finance Minister Nirmala Sitharaman on February 1. This would be a major trigger for the Indian Rupee.
• Reports showed that the Indian government is expected to target a fiscal policy deficit of about 4.2% of GDP in the Financial Year 2027.
• On the other hand, the capital firms expect that if the administration focuses on boosting near-term growth, it could increase government spending or cut taxes. This step would widen the fiscal deficit to around 4.4% of GDP.
• In the US, Michelle Bowman, a dovish commentator from the Federal Reserve, argued in a speech on Friday that the FED has to be ready to cut interest rates further amid fragile labor market conditions.
• According to the CME FedWatch tool, the higher probability goes to hold interest rates steady in the range of 3.50%-3:75% in the January policy meeting.
• Traders have to watch the preliminary India-US private Purchasig Managers’index (PMI) data for January. It’s scheduled to release on Friday.

The Geopolitical Side:

• US-India tensions started when Washington raised tariffs on imports from New Delhi to 50%. This level of tariffs was the highest among all trading partners. This action effectively penalized India for continuing to buy oil from Russia.
• Apart from this, the US Dollar became uder pressure due to the ongoing tensions between the US and the Eurozone regarding Greenland that Trump wants to control.
• Trump has announced a 10% tariffs on goods imported from European Union members, including Denmark, Sweden, France, Germany, Finland, and the Netherlands. It is supposed to be effective by Feb 1, until Washington is allowed to buy Greenland.
• EU members criticized the US plan to buy Greenland and warned of a united and coordinated response. France’s President Emmanuel Macron said he will ask the EU to use its strong “anti-coercion tool” if the US adds more tariffs over the Greenland dispute, according to France 24.

The Technical Outlook for the USD/INR:

The price has been consolidating above the previous rectangular range, showing a clear pattern of higher highs. This indicates a bullish momentum. After breaking out from the consolidation zone, the market continues to trade above the 0 level. It suggests that I may move sideways for a while before attempting a break above the all-time high around 91.

The MACD is confirming bullish momentum and indicating that buyers are currently in control and momentum is strengthening. The RSI is approaching the overbought zone around 67, which indicates strong buying pressure.

Overall, the chart shows sustained bullish sentiment, but the next key move depends on whether the price can hold above 90 and challenge the all-time high.