The wave of geopolitical instability pushes USD/INR to a 2-week high, with the 80 USD to INR level showing signs of recovery?

Driving Forces Behind the Strengthening USD: Trade Conflicts and Global Uncertainty

The beginning of the week saw the USD/INR pair jump close to 90.50 as concerns over global geopolitical tensions increased. Not only individually, but the market also recorded Washington’s strategic action in Venezuela — which holds up to 7% of global oil reserves (303 billion barrels) — along with President Trump’s statements regarding actions against Iran and Colombia, creating a tense geopolitical landscape.

The US Dollar Index (DXY) clearly reflects this momentum, rising 0.35% to nearly 98.80. Global investors are shifting funds into traditional safe-haven assets, with the US dollar being the top choice, exerting significant pressure on emerging market currencies like the Indian Rupee (INR).

India Faces a Double Impact: Tax Threat + Foreign Capital Outflows

Recently, President Trump publicly warned about the possibility of increasing import tariffs from India to 50% if New Delhi does not support US policies related to Russian oil. His remarks highlight the phase-based nature of trade pressure: “They want to make me happy. Prime Minister Modi is a good man, but they know I am not pleased. We can raise tariffs very quickly.”

The realization of this threat has caused foreign funds (FII) to withdraw from the market. Data shows that in 2025, FIIs withdrew 3,06,418.88 crore Rs from the Indian stock market. In the first two days of January 2026, they continued to sell off with a value of 2,978.80 crore Rs, indicating prolonged lack of confidence.

Pressure on the Rupee: RBI Forced to Intervene

The combination of increased US dollar demand from Indian importers and outflow of foreign capital has created undeniable pressure on USD/INR. A record high of 91.55 was recently recorded, forcing the Reserve Bank of India (RBI) to intervene directly in the spot and forward (NDF) markets to support the Rupee.

These signs suggest that the 80 USD to INR level is just a small milestone amid the ongoing pressure on USD/INR from multiple fronts.

Hidden Positive Factors: Cheap Oil Could Support INR

However, Washington’s plans to take over and restructure Venezuela’s oil industry bring a glimmer of hope for India. As one of the largest oil importers in the world, meeting 85% of its energy needs through imported oil, any decrease in energy prices will improve New Delhi’s trade balance and could provide long-term support for the Rupee.

Upcoming Market Events: Economic Data to Guide the Direction

Next week will feature a series of important US economic releases. The December ISM Manufacturing PMI is forecasted to rise slightly to 48.3 from 48.2 in November, indicating that activity remains contractionary but at a milder pace.

The December Non-Farm Payrolls (NFP) data — to be released on Friday — will have a decisive impact on market expectations regarding the Federal Reserve (Fed) interest rate decision on January 28. According to the CME FedWatch tool, the Fed is expected to keep rates steady within the 3.50%-3.75% range.

Technical Perspective: Charts Paint a Clear Picture

On the daily chart, USD/INR is trading at 90.4470 with continuous upward momentum. The 20-day exponential moving average (EMA) slopes upward at 90.2130, maintaining a slight bullish bias, indicating traders still intend to buy on dips.

The 14-day Relative Strength Index (RSI) stands at 56.86 and is rising, confirming strong momentum development. The key support level is at the 20-day EMA; if the daily close falls below this, a deeper correction toward the December low at 89.50 could occur.

Conversely, the record high of 91.55 remains the main upside barrier, where traders might take profits.