• The Indian Rupee declines sharply as FIIs continue to dump their stake in the Indian stock market.
• The RBI is expected to continue reducing interest rates in the near term.
• Fed’s Bostic stresses the need for a restrictive interest rate policy to contain inflation risks.

The Indian Rupee (INR) posts a fresh two-month low against the US Dollar (USD) on Friday. The USD/INR pair jumps 0.55% to near 91.15 as the Indian Rupee underperforms across the board amid the continuous outflow of foreign funds from the Indian stock market.

On Wednesday, Foreign Institutional Investors (FIIs) offloaded their stake worth Rs. 4,781.24 crore, according to data from NSE. The selling pressure from FIIs continues in the Indian equity market amid the absence of a trade deal announcement between the United States (US) and India. So far in January, FIIs have remained net sellers in nine out of ten trading days, and have pared their stake worth Rs. 21,706.27 crore.

This week, trade talks took place between India’s External Affairs Minister Subrahmanyam Jaishankar and US Secretary of State Marco Rubio, which were called “good” by both through their social media posts, but the sentiment of overseas investors towards the Indian stock market remains weak amid the absence of a breakthrough in trade discussions.

Economists at HSBC have also pointed out that weak capital inflows into the Indian stock market are a major problem for the Indian Rupee.

On the economic front, India’s retail and wholesale inflation data for December have shown growth in price pressures, but this is unlikely to deter the Reserve Bank of India (RBI) from delivering more interest rate cuts in the near term. Though the retail Consumer Price Index (CPI) has grown at a faster pace of 1.33% Year-on-Year (YoY), it is still lower than the RBI’s tolerance band of 2%-6%.

Daily Digest Market Movers: Investors expect Fed to hold interest rates steady later this month

• The Indian Rupee trades lower against the US Dollar, even as the latter edges down ahead of an extended weekend in the US. At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks lower to near 99.28. However, the DXY is still close to its six-week high of 99.50 posted the previous day.
• On Thursday, the US Dollar gained sharply after hawkish remarks from Federal Reserve (Fed) officials. Kansas Fed Bank President Jeffrey Schmid and Atlanta Fed Bank President Raphael Bostic stressed the need to maintain a restrictive stance on interest rates, citing upside inflation risks.
• “We need to stay restrictive because inflation is too high," Bostic said on Thursday, adding, “I expect inflation pressures will continue through 2026 as many businesses are still incorporating tariffs into prices.”
• According to the CME FedWatch tool, the Fed is certain to hold interest rates steady in the current range of 3.50%-3.75% in the January policy meeting.
• Going forward, the major trigger for the Silver price will be the announcement of the new Fed Chairman by the White House. US President Trump said in December that he would announce the successor to Fed Chair Jerome Powell sometime in January.
• The comments from Trump in his latest interviews show that White House Economic Adviser Kevin Hassett, former Fed Chair Kevin Warsh, and current Fed Governors Christopher Waller and Michelle Bowman are major contenders to replace Jerome Powell.

Technical Analysis: USD/INR aims to revisit all-time high near 91.50

USD/INR surges to near 91.15 as of writing. The 20-day Exponential Moving Average (EMA) is rising and continues to underpin the advance. Price action holds above this dynamic gauge, keeping pullbacks contained.

The 14-day Relative Strength Index (RSI) is at 64.23 (bullish), demonstrating strong momentum, with no overbought conditions. Initial support sits at the 50-EMA at 89.9134.

As long as the pair holds above the average, topside extension remains favored, while a close below it would soften the tone and expose a deeper retracement.

(The technical analysis of this story was written with the help of an AI tool.)