## Indian Rupee Appreciates Significantly, USD/INR Drops Sharply Amid Geopolitical Pressures

Wednesday's trading session marked a significant turning point as the Indian Rupee (INR) rebounded strongly against the US Dollar (USD). The USD/INR pair recorded a deep decline of nearly 0.5%, reaching a low of 89.80, reflecting the unexpected strength of the Indian currency amid escalating geopolitical tensions. While this short-term trend appears positive, experts warn that underlying pressures remain, especially as trade tensions between Washington and New Delhi continue to escalate.

## The Depth of the Trade Crisis: Trump, Russian Oil, and Long-Lasting Consequences

Last week, President Donald Trump announced harsh tariffs on India, citing the country's energy policies—specifically, oil imports from Russia—as the main reason. New Delhi currently faces a total tariff of 50% on exports to the US, with a special 25% tariff applied due to oil relations with Moscow. This is among the highest tariffs the US has imposed on its trade partners.

From a macroeconomic perspective, the impact seems minor—about 0.3%-0.5% of India's GDP—but the psychological effect is profound. This is clearly reflected in the continuous withdrawal of foreign investors from the Indian stock market, particularly (FIIs).

## Foreign Capital Flows: Warning Signs from FII Sell-offs

The year 2025 has seen a concerning event: FIIs have sold stocks worth 3,06,418.88 crore Rs on the Indian market. Since January, foreign investors have continued to sell stocks worth 3,122.68 crore Rs. However, the most optimistic signals appeared in the last two trading sessions, as the pace of sell-offs slowed. In just two days, (Monday and Tuesday), FIIs sold 143.88 crore Rs—a relatively lower figure compared to previous rates.

## Market Cautiously Awaiting US Jobs Data

Global investors are currently waiting for key economic data releases from the US. The USD/INR is expected to remain range-bound until the official figures are announced during the North American session. The US Dollar Index (DXY), which measures the dollar's strength against six major currencies, is currently trading weakly around 98.50.

Key indicators to watch include:

**ADP Employment Change:** Experts forecast the private sector will add 45,000 new jobs after shedding 32,000 in November.

**December ISM Services PMI:** Expected at 52.3, down from the previous reading of 52.6, indicating that the service sector remains expanding but at a moderate pace.

**November JOLTS Job Openings:** Forecasted at 7.64 million, nearly unchanged from October.

These figures are extremely important as the US labor market is becoming a key focus for the Federal Reserve's monetary policy decisions (Fed). In 2025, there have been three rate cuts, mainly driven by signs of weakening in the labor market.

Last Tuesday, Richmond Fed President Thomas Barkin emphasized that "nobody wants to see the labor market deteriorate further." Barkin also warned that policymakers will need to carefully consider upcoming meetings, especially as inflation remains above the 2% target.

The week's biggest highlight will be the US Non-Farm Payrolls (NFP) data for December, expected to be released on Friday, which could cause significant volatility for the USD/INR pair.

## Technical Analysis: 20-Day Exponential Moving Average as a Key Barrier

On the technical chart, USD/INR is engaged in a determined struggle below the psychological level of 90.00. At Wednesday's open, the pair tested this zone but struggled to establish stability above the 20-day exponential moving average (EMA), currently at 90.22.

The 14-day Relative Strength Index (RSI) has fallen to 49.28 after leaving overbought territory, indicating momentum has returned to neutral. This creates slight downward pressure on the price.

To revive bullish efforts, the RSI needs to recover above 50. If this occurs, buyers will have a chance to test the resistance level at 91.3115. Conversely, if RSI continues to decline toward 40, sellers will intensify pressure, keeping the pair within a narrow range until momentum stabilizes.

_(Technical analysis supported by AI tools)_