The Indian Rupee extended losses against the US Dollar on Tuesday, with USD/INR rising to near 93.50. Selling pressure followed the Reserve Bank of India withdrawing measures aimed at limiting one-way moves in the currency.
The RBI removed curbs on state-run banks offering non-deliverable forwards (NDFs) to resident and non-resident users, and ended restrictions on rebooking foreign exchange derivative contracts. The changes were reported by Reuters.
Talks between the US and Iran were reported as set to resume either Tuesday night or Wednesday morning. The Wall Street Journal said Iran told regional mediators it would send a team to Islamabad on Tuesday, but Tehran has not confirmed this.
Washington confirmed Vice President JD Vance would travel to Islamabad to lead the US team. On Monday, Iran’s foreign ministry spokesperson Esmail Baghaei said there was “no plan for a second round of negotiations with the US for now.”
Foreign Institutional Investors sold Indian shares worth Rs. 1,059.53 crore on Monday. In the last three sessions of the previous week, FIIs bought Rs. 1,731.71 crore, averaging Rs. 577.24 crore.
Markets are watching Kevin Warsh’s confirmation hearing and US March Retail Sales at 12:30 GMT. Retail Sales are forecast to rise 1.4% month-on-month, after 0.6% in February.
USD/INR moved back above the 20-day EMA at 93.08, with RSI (14) in the 40.00–60.00 range. Levels noted were 94.00 on the upside and 92.46 on the downside.
Looking back to the situation in April 2025, the Reserve Bank of India’s decision to remove curbs on forex trading was a significant signal. We saw this as the central bank stepping back, willing to tolerate more currency weakness and allowing market forces to play a larger role. For us, this meant positioning for a weaker Rupee, as the primary supporter of the currency was becoming more hands-off.
The uncertainty around the US-Iran talks at that time created significant volatility, which presented a clear opportunity in the options market. Given the binary nature of the outcome—a deal causing risk-on sentiment or a collapse causing risk-off—we should have considered buying volatility through straddles or strangles. This would have allowed us to profit from a large price swing in USD/INR, regardless of the direction the talks went.
We also noted the persistent selling by Foreign Institutional Investors, a trend that was well-established by early 2025. FIIs had pulled out over $3 billion from Indian equities in the first quarter of that year, and the selling in April confirmed this bearish sentiment. This capital outflow was a fundamental reason to maintain a long position on the US Dollar against the Rupee.
The focus on strong upcoming US data, particularly the retail sales figures for March 2025, suggested a widening economic divergence. A strong US economy, which was later confirmed when the retail sales data came in at a robust 1.6%, supported the case for a stronger dollar. This reinforced the strategy of buying USD call options or selling INR futures, anticipating further dollar strength.
From a technical standpoint, the key level for us was the 20-day EMA at 93.08. As the USD/INR pair held above this mark, it provided a clear signal to initiate or add to long positions. We should have used this level to manage risk, placing stop-loss orders just below it while targeting the psychological level of 94.00.
