Last Updated on October 5, 2026 by Deon
The Indian Rupee (INR) started the week a little higher compared to the US Dollar because traders are expecting fewer increases in the Federal Reserve interest rates. The USD/INR pair went down to 96.29. It is still near its recent two-month high of about 96.32.
This change happens as financial markets look again at US money policy after weak employment data came out. However the Rupees improvement is not very big because the US Dollar and Treasury rates are still high. Investors are also waiting for the Reserve Bank of Indias decision on money policy this week.
The weak jobs data in the US is helping the Rupee
The recent US jobs report has changed what people think about the Federal Reserves plans.
US jobs added 29,000 in September, which is much lower than the 90,000 that people expected. The months number was also lowered. At the time the US unemployment rate went up to 4.2% and yearly wage growth dropped to 3.0%.
These bad numbers have made traders think that the Federal Reserve might not raise rates soon. According to CME FedWatch numbers from FXStreet the chance that the Fed keeps rates the same in October went up to about 82.3% compared to 35.8% a week
If the US interest rates do not go up it can help currencies from emerging markets like the Rupee because it makes US money assets less attractive.
The US Dollar is still very strong
Even though the US jobs data was not good the US Dollar is still strong.
The Dollar Index or DXY hit a high for the year near 102.53 during Asian trading. US Treasury rates are also high with the 10-year rate to 5.27% and almost at its highest in two decades.
High US rates can still bring in money from countries to US assets. This makes it harder for the Rupee especially when global investors are already worried about emerging markets.
The strong US Dollar and high Treasury rates mean that the Rupees recent rise could stay small unless big changes happen in global interest rate expectations.
The RBI policy is now the thing to watch
The biggest thing that will affect the Rupee this week is the Reserve Bank of Indias decision on money policy on October 7.
People are watching to see if the RBI will keep the interest rate or start raising it. Reuters says that 60% of economists think the RBI will raise rates by 25 basis points and the market also expects rates to go up.
If the RBI raises rates it could help the Rupee by making Indian assets more appealing. It could also show that officials are worried about inflation and conditions.
MUFG thinks the RBI will not change rates now but might start raising them in December. The bank also expects the RBI to start making strict decisions.
This makes the words used in the RBI statement important for those who trade the Rupee.
Indias economy is doing well but inflation is a concern
Indias economy is still doing okay but inflation is becoming a bigger problem.
MUFG says growth, lots of money in the system more credit and good government spending are reasons the RBI might raise rates. Higher prices for goods and bad weather could also push inflation higher.
If inflation keeps going up and the economy stays strong the RBI might have reason to keep things easy.
For the Rupee a real sign that the RBI will raise rates could help it in the term especially if the Federal Reserve is doing the opposite.
Oil prices are a risk
Crude oil prices are another thing for the Indian Rupee.
India imports a lot of oil higher prices can make the cost of importing more and put pressure on the Rupee. Recent reports say oil prices are still above $100 a barrel. Some drop in prices has given a little relief.
If oil prices keep going up more people in India will need US Dollars to buy oil making it harder for the Rupee to get stronger.
On the hand if oil prices fall a lot it could help Indias money balance and give more support to the Rupee.
USD/INR technical view
Looking at the numbers USD/INR is still showing a good short-term trend.
The pair was at around 96.29 while the 20-day moving average was about 95.86. Long as USD/INR stays above that average the people who want the Dollar to go up have an advantage.
The 96.30 level is important for now because it is close to the high of two months. If the pair stays above that it might move toward the 97.00 level.
On the side 95.86 is the first important support. If that level breaks it could mean the Dollar is losing strength and the Rupee could go up more.
The Relative Strength Index is at around 65, which shows there is still strength to the upside. It also means the pair might be getting too stretched.
What traders should watch
The RBIs decision is the event for Rupee traders this week. Investors will pay attention not to the interest rate decision but also to what the central bank says about future plans.
US economic data will still be important. Information about the service sector the FOMC minutes and upcoming jobs numbers could change what people think about the Fed.
Traders should also look at US Treasury rates oil prices, money coming from abroad and how the US Dollar is doing.
These things can decide if the Rupees recent improvement turns into a move or just a short boost.
Indian Rupee outlook
The Rupee started the week a little but the overall outlook is still not very positive. Lower expectations for a Fed rate increase are helping,. Strong US rates and a strong Dollar are still making things hard.
The RBIs decision could be the big event. A decision to raise rates could help the Rupee while a cautious approach could leave USD/INR open to going up again.
For now traders will watch the 95.86 support level and the 96.30 resistance area.
The Indian Rupee is a little higher as traders expect chance of a Federal Reserve rate increase in October. However the currency is still near its low because the US Dollar and Treasury rates are still strong.
The RBI decision on October 7 is now the event, for Rupee markets. A decision to raise rates could help the Rupee while high oil prices, money going out and strong US rates could keep the Rupees gains from growing.
For traders of USD/INR the 96.30 level is important. 95.86 Is the main support. The next big move will probably depend on what the RBI says and where global interest rates go.
