The Indian rupee confronts mounting headwinds Monday, with 1-month non-deliverable forwards signaling an opening range of 90.22-90.28 against the dollar after Friday’s 0.16% slide to 90.1625. Escalating tensions between President Donald Trump and Fed Chair Jerome Powell—highlighted by US prosecutors launching a criminal probe into Powell—threaten to exacerbate foreign outflows and importer hedging already straining the currency.
RBI Interventions Prove Short-Lived
Reserve Bank of India conducted dual interventions last week to counter speculative dollar longs as USD/INR momentum built. The rupee briefly rallied to 89.75 post-action, but equity outflows, dollar strength, and hedging flows quickly eroded gains. “This underscores the intense pressure,” noted a foreign bank trader, predicting a 90.50 test this week without repeat RBI firepower.
Trump-Powell Clash Overshadows Jobs Data
Powell’s accusation of administration legal threats to sway policy coincides with Friday’s softer-than-expected US jobs report (fewer December hires than forecast). Yet Fed rate cut expectations remain anchored despite the political drama rocking markets. Dollar index eases to 98.95 while Brent holds $63.4/barrel and 10-year yields steady at 4.17%.
Institutional Flows Add Downward Tilt
NSDL data reveals foreign investors net sold $412.7 million Indian equities January 8 against $72.7 million bond purchases. Persistent FII equity trimming amid global uncertainties compounds rupee woes. Corporate hedging accelerates as importers front-load dollar demand ahead of potential tariff escalations.
Key Technical Levels
Immediate support emerges at 90.40-90.50 with psychological 91.00 looming if breached. Upside resistance clusters at 89.90-90.00. RBI’s intervention threshold appears recalibrated higher after last week’s aggressive action yielded fleeting results.
Broader Market Implications
Rupee weakness ripples through importer margins, IT export valuations, and oil import costs. Equity markets—already nursing five-session losses—face compounded pressure as FII selling persists. Gold/silver safe-haven bids reflect broader risk aversion.
Traders brace for elevated volatility as Trump-Powell developments unfold alongside Q3 earnings and Union Budget anticipation. RBI watches closely but appears restrained after recent efforts. The 90.50 barrier represents week’s critical test.
