Recent Movements in USD/INR: A Sharp Recovery Amid Fed Speculation and RBI Intervention

The US dollar has reclaimed ground against the Indian rupee after a brief slide, driven primarily by persistent expectations that the Federal Reserve will cut rates. On 25 November 2025, the USD/INR pair tightened to 89.05, marking an 11‑paise gain in early trade. This rebound follows a series of interventions by the Reserve Bank of India (RBI), which has repeatedly stepped in to curb the rupee’s depreciation during a period of heightened market volatility.

Fed‑Fed vs. RBI: The Currency War of Expectations

While the RBI’s intervention has provided temporary support, the underlying pressure on the rupee remains acute. The market’s skepticism toward the rupee’s resilience is reinforced by the IMF’s anticipated reclassification of India’s exchange‑rate regime. According to the IMF’s forthcoming assessment, India’s policy might be described as a “crawling peg,” a designation that implicitly acknowledges a degree of managed float but also signals potential currency flexibility. Such a shift could embolden traders to bet on further depreciation, especially as the USD’s strength is buoyed by speculation of forthcoming Fed rate cuts.

The Role of Commodity Prices

Lower international crude oil prices have also contributed to the rupee’s short‑term lift. The decline in oil costs reduces the import burden on India, providing a modest boost to the current‑account balance. However, this effect is unlikely to sustain the rupee’s upward trajectory without concurrent improvements in domestic fundamentals.

Domestic Growth: A Mixed Signal

India’s economy is projected to expand by 7.3 % in the July‑September quarter, driven largely by robust rural demand and increased government spending. While this growth forecast injects confidence into the market, it is dwarfed by concerns over private‑sector activity, which has slowed recently. The private‑sector slowdown, coupled with a subdued stock market, keeps the rupee vulnerable to external shocks and policy shifts.

Technical Outlook

The rupee’s latest recovery comes at a price close to its 52‑week high of 89.7258 (20 November 2025). The 52‑week low of 72.9671 (4 May 2025) remains distant, suggesting that a sustained reversal of the current trend would require significant macro‑economic or policy changes. The close price of 89.634 (23 November 2025) indicates a marginal improvement but also reflects the currency’s sensitivity to both domestic interventions and global monetary policy.

Conclusion

In sum, the USD/INR pair’s recent strengthening is a short‑term reaction to Fed expectations and RBI actions rather than a fundamental shift in India’s currency dynamics. The rupee’s trajectory will hinge on the interplay between continued domestic growth momentum, the RBI’s willingness to intervene, and the evolving narrative around India’s exchange‑rate framework. Traders should remain alert to potential volatility as the market balances these competing forces.